US EARLY MORNING: Equity futures lower as West beefs-up Russia sanctions; Watch defence names, banks, energy companies and autos closely

• 
  EQUITIES: US equity futures are being dragged lower, as are other global counterparts, as the Western response to Russia was boosted over the weekend. A note on the Ukraine/Russia state of play can be accessed here, and contains a list of all the major developments from the weekend and today. The main takeaways are that SWIFT exclusion has only been applied to a certain amount of Russian banks, energy is still not included, while Western corporates are under pressure to give up stakes in Russian companies and cease doing business with the nation (BP exits its Rosneft stake, for instance, and Exxon is under pressure to do the same). In terms of how European corporates have responded at the start of the week, European defence names have been buoyed on news that Germany will raise defence spending; European banks are being flogged after Russian banks were partially ejected from the SWIFT messaging system; European automakers are lower amid a shortage of parts from Ukraine.


• 
  TREASURIES: Yields are lower along the Treasury curve by between 6-9bps, but have gradually drifted off lows seen overnight. The shape of the curve is biased towards steepening. While Russia related headlines have rightly captured the market’s attention, it is worth noting that this week sees Federal Reserve Chair Powell deliver his two semi-annual testimonies to lawmakers ahead of Friday’s crucial jobs report, which is the last officials will see before the March 16th FOMC meeting. Pricing for a 50bps rate hike has almost diminished recently as traders bet that the geopolitical developments regarding Russia will force the Fed to raise rates cautiously; according to Refinitiv data, there is now only around a 13% chance of a 50bps move, with the consensus firmly in the 25bps camp. Powell and Co are likely to reiterate that the geopolitical events will likely contribute further to higher energy prices, but has in the passed tended to look at these events as one-off shocks, which might suggest that the Fed is on course to continue tightening, but with caution, particularly as there could be some corporate reaction, given some corporates are under pressure to release their stakes in Russian ventures. 


• 
  DOLLAR: Overnight, the Dollar Index has been in a range above the 97.00 handle (97.01-97.43), and is sitting towards the bottom-end of that range at pixel time, trading around flattish levels; other haven FX like the JPY have come off highs, but the CHF remains bid. In a sign of the yuan’s emerging status as a haven currency, the Chinese currency continues to appreciate, with the offshore CNY now sitting on a 6.30 handle, amid reports that China had instructed state banks to buy dollars at 6.31. Meanwhile, the Russian RUB plunged to fresh record lows amid the Western sanctions response; the CBR lifted rates from 9.5% to 20.0% this morning in an emergency decision, and other reports suggest Russia has introduced mandatory FX sales for companies, according to Russian news outlet IFX, and Russian corporates will have to sell 80% of their FX revenue.

EQUITY NEWS: 

ENERGY:

• 
  SPR - EU will Monday debate its response to US proposals for a coordinated release of emergency oil reserves to help counter a surge in energy prices after Russia’s invasion of Ukraine (BBG); Follows news last week that the US and its partners working on a global oil reserve release (Reuters).


• 
  BP (BP) - To exit its 19.75% shareholding in Russia's Rosneft, taking USD 25bln charge. BP will no longer report reserves, production or profit for Rosneft. BP said its financial frame and distribution guidance remains unchanged. (BP)


• 
  Exxon Mobil (XOM) - Exxon will likely face new pressure to severe ties with Russia's Rosneft after rival BP agreed to unload its own stake in Russia's largest oil producer. (Reuters)


• 
  European Pipelines - Ukraine’s pipeline operator says gas continues to flow after an explosion near a Kharkiv facility. (NYT)


• 
  Nuclear - Germany mulls life-span extension of its nuclear power plants to help secure energy supply. Elsewhere, Chancellor Scholz said Germany would construct two LNG terminals to reduce dependency on Russian gas. (Newsquawk)


• 
  Chevron (CVX), Renewable Energy Group (REGI) - Chevron in advanced talks over USD 61.50/shr deal for Renewable Energy for a total around USD 3bln, sources said. (Bloomberg)

INDUSTRIALS:

• 
  Defence Names - Germany will channel EUR 100bln this year into a fund to modernise its military; by 2024, will spend at least 2% of GDP per annum on defence, in line with a NATO target that Berlin has consistently failed to meet. (BBG)


• 
  Volkswagen (VWAGY), Renault (RNLSY) - Factories operated by Volkswagen and Renault will suspend operations next week due to a shortage of parts made in Ukraine; VW to halt production at Zwickau (Europe’s biggest electric-car plant) and Dresden plants. (Bloomberg)


• 
  Daimler Trucks (DTRUY) - To suspend all cooperation with Russia's Kamaz, according to RIA. (Newsquawk)


• 
  United Parcel Service Inc (UPS), FedEx (FDX), Deutsche Post (DPSGY) - US logistics companies UPS and FedEx have halting delivery service to Russia and Ukraine; Germany's Deutsche Post has temporarily suspended shipments to and from Ukraine, and is avoiding Ukrainian airspace. (Reuters)


• 
  Tesla (TSLA), Panasonic (6752 JT) - Panasonic is to establish production facility for new Tesla (TSLA) auto battery at plant in Japan. (Newsquawk)

FINANCIALS:

• 
  Crypto - Russian Bitcoin (BTC) and other cryptocurrencies could be part of future sanctions against Russia (WSJ); Binance will not unilaterally freeze crypto accounts in Russia (Newsquawk).


• 
  Norway SWF - Norway's sovereign wealth fund will dump its Russian investments as part of a wider package of support for Ukraine; will begin unwinding its existing USD 3bln of Russian holdings. (FT)


• 
  Societe Generale (SCGLY), Credit Suisse (CS) - The two European banks reportedly halt financing commodities trading from Russia. (Bloomberg)


• 
  Berkshire Hathaway (BRK) - Results showed profits soaring, but Warren Buffett bemoaned the lack of good deals, and warned that low interest rates have inflated valuations across financial markets. (FT)


• 
  Credit Suisse (CS), Morgan Stanley (MS), Goldman Sachs (GS) - Credit Suisse is reportedly helping US DoJ to potentially build a case related to block trading against rivals Morgan Stanley and Goldman Sachs. Sources said CS' push to provide assistance goes beyond banks' routine cooperation with requests for information. (Bloomberg)

TECH:

• 
  Apple (AAPL) - Norway's sovereign wealth fund oil fund is to vote against Apple's pay policies, amid growing shareholder backlash against tech group’s remuneration (FT). But Berkshire Hathaway's Buffett called Apple the second-most important business, and made clear he is a fan of CEO Tim Cook’s stock repurchase strategy; Berkshire’s Apple stake is now worth more than USD 160bln, taking up 40% of its equity portfolio (CNBC).


• 
  Alphabet (GOOG) - Russia reportedly orders Google to ban access to Ukraine 'fake news', according to IFX. (Newsquawk)


• 
  Alphabet (GOOG), Amazon (AMZN) - Google's parent adopts new bonus plan, Amazon doubles its salary cap as lure of stock fades amid inflation and increased competition. (WSJ)


• 
  Meta Platforms (FB) - A hacking group used Facebook to target a handful of public figures in Ukraine, including prominent military officials and politicians. (Reuters)


• 
  Apple (AAPL) - Apple argued that it has complied with a Dutch order to open its App Store to alternative payment providers for dating apps in the Netherlands. (Reuters)


• 
  Intel (INTC) - Chipmaker Intel has selected Magdeburg in Germany for its new European chip factory. (Reuters)


• 
  Nvidia (NVDA) - Recent cyber breach appears to have been a ransomware attack that is not connected to the crisis in Ukraine; hack looks to be relatively minor. (Bloomberg)


• 
  Uber Technologies (UBER) - Uber is testing a new driver earnings algorithm; will allow drivers to see pay and destinations before accepting a trip, raises incentives for drivers to take short-rides. The changes are the most wide-ranging to its driver pay algorithm in years, comes at a time when it is still trying to win back drivers who left at the start of the pandemic. (Reuters)


• 
  Zendesk (ZEN), Momentive Global (MNTV) - Zendesk shareholders rejected its USD 4bln takeover of SurveyMonkey's parent Momentive Global; Momentive said its merger agreement with Zendesk had been terminated. (Reuters)

HEALTH CARE:

• 
  COVID - New research points to a Wuhan market in China as the origin of the pandemic, further undermining claims that the coronavirus originated in a lab. (Newsweek)


• 
  Bayer (BAYRY) - Cinven nearing deal to acquire Bayer's pest control business, sources said. Bayer has been seeking a value of about EUR 2bln. (Bloomberg)

COMMUNICATION:

• 
  Discovery (DISCA) - CBS' Chris Licht Will Take Command of CNN in the much-anticipated merger between Discovery and WarnerMedia, expected to take place in April. (Variety)


• 
  Ericsson (ERIC) - Leaked files show the Ericsson allegedly helped the Islamic state. (Guardian)

CONSUMER CYCLICAL:

• 
  The Goodyear Tire & Rubber Company (GT) - Barron's positive commentary, says GT is a buy and the stock could rise +50% on EVs. (Barron's)

CONSUMER STAPLES:

• 
  Softs - China State Planner says it will purchase pork for state reserves. (Newsquawk)

OTHER POLITICS/GEOPOLITICS:

• 
  N.KOREA - North Korea said Monday that it had conducted a test for a reconnaissance satellite system on Sunday, when a missile launch in the country was detected by neighbours. (WaPo)


• 
  TAIWAN - Former Japan PM Abe called on the US to abandon any ambiguity on Taiwan’s defence, and floated the possibility of Japan hosting American nuclear weapons. (Nikkei)


• 
  US MID-TERMS - President Biden's approval rating hits a new low; voters indicate more trust in Republicans than Democrats as they approach November’s midterm elections. Biden has 61% negative ratings; poll finds 50% want Republicans in charge of Congress, 40% prefer Democrats. (WaPo)


• 
  SCOTUS - Republicans signal they want to avoid partisan warfare over SCOTUS nominee; while Biden aims for some bipartisan support. (WSJ)

28 Feb 2022 - 10:12- Research Sheet- Source: Newsquawk