US EARLY MORNING: Index futures are around flat following Wednesday's 'hawkish' FOMC minutes

EQUITIES: US equity futures are trading around the flat mark (NQ +0.1%, ES -0.1%, YM -0.2%, RTY -0.2%); with these indices already breached their respective 200dma to the downside, their respective 50dmas are now in play. Wednesday’s downside was attributed to the release of the FOMC’s March meeting minutes, which suggested that a 50bps May rate rise was likely and we will also likely get the announcement of balance sheet runoff (see Treasuries section, below). After Wednesday's sell-off, Fundstrat's technical strategists said that a test of the February lows might not immediately be on the cards, though they expect trading to continue in a choppy, volatile fashion. Some technical factors point to some short-term support for stocks, it argues: "Elliott-structures shows recent weakness having taken the form of a possible ABC correction, which has successfully held early March peaks (which now should be support for indices)", while both the S&P 500 and Nasdaq have reached key Fibonacci retracement levels, and the RSI momentum gauge is oversold. "Overall, more needs to happen to think trading lows are in, but it's right to use prior lows from April 1st as a guide," it writes, "over 4507.57 in SPX and QQQ-358.59 on a close would suggest a brief rally into April expiration could be underway."

TREASURIES: Yields along the Treasury curve have narrowed on Thursday, having notched fresh post-pandemic highs on Wednesday in wake of the FOMC’s March meeting minutes, which signalled “many” participants were in favour of a 50bps rate hike, but ultimately opted for a 25bps move due to the uncertainties around Ukraine. Participants also believe that it would be appropriate to raise rates to neutral “expeditiously” (NOTE: the Fed currently sees neutral is between 2.25-2.50% vs rates currently at 0.50%). Analysts said that this all but confirms we will see a 50bps move at the May meeting, with money markets now assigning an 85% probability of this outcome. Crucially, the Fed began to give some guidelines of its balance sheet normalisation strategy: Committee members "generally agreed" that the balance sheet drawdown should be passive, with monthly caps of USD 60bln for Treasuries, and USD 35bln for MBS, totalling USD 95bln per month. That total figure is almost double the previous episode of balance sheet tightening, and was a little below the consensus view, which had been centring around USD 100bln. The minutes said these caps could be phased in over a period of three-months, or perhaps longer if needed; direct sales of MBS holdings would be considered after the runoff process was "well under way." The release suggests that this balance sheet runoff programme could be announced at the May meeting. The day ahead features weekly initial jobless claims data and consumer credit data. On the speakers’ docket, Bank of England’s Pill will deliver remarks, while Fed’s Bullard (hawkish dissenter, voter), Fed’s Evans (dove, 2023), and Fed’s Bostic (2024) are on the slate. Our 'Day Ahead' calendar can be accessed here.

EQUITY NEWS:

US KEY EQUITY LEVELS (via Credit Suisse):

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  SPX: 4376, 4391, 4424, 4437, 4455/62, 4488, 4508/14, 4539, 4637, 4663/68.


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  NDX : 14385, 14441/46, 14578, 14720/24, 14885, 15000/07, 15055, 15162, 15230/65, 15335/82


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  RUT: 1946, 1988/78, 2000, 2019/16, 2035, 2047/45, 2054, 2075/68, 2100/01, 2138

ENERGY:

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  Shell (SHEL) - Will write down USD 5bln in Q1 as it exits Russia, higher than previously expected, but said O&G trading will be boosted from higher energy prices. (CNBC)


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  Big Oil - Executives defended themselves at a Congressional hearing on Wednesday against accusations that Big Oil companies were price gouging; execs said that they were boosting energy output, and clarified to lawmakers that no one company sets the price of gasoline. (Reuters)

COMMUNICATIONS:

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  Meta Platforms (FB) - Drawn up plans to introduce virtual currency for the metaverse as it seeks alternative revenue streams and new features that can attract and retain users. The currency is unlikely to be a cryptocurrency based on the blockchain. (FT)


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  JD.com (JD) - Appoints Lei Xu as CEO, replacing founder Richard Liu; was previously JD.com's President, and Liu will remain Chair. Appointment comes amid a regulatory crackdown in China's tech sector which has weighed on share prices, and amid tensions between US/China which poses uncertainty over the future of Chinese companies listed in the US. (FT)


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  Paramount Global (PARA), RECUR - Paramount and RECUR to launch Star Trek NFTs on April 9th; also launches 'Paramount.xyz', a "unified platform for fans of Paramount’s biggest IP and franchises." Variety said fans were already angry about Star Trek non-fungible tokens. (Star Trek, Variety)


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  Take-Two Interactive Software (TTWO), Microsoft (MSFT), Sony (SONY) - Remedy Entertainment announced it will remake Max Payne and Max Payne 2 in a new development agreement with Take-Two's Rockstar Games. (Remedy)


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  Comcast (CMCSA) - Comcast's Peacock will exclusively live stream MLB's 'game of the week' on Sunday mornings, beginning May 8th for 18 consecutive weeks. (MLB)


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  Genius Sports Limited (GENI) - Gained 4.1% in after hours trade. NFL is now the largest US shareholder, controlling about 7.7%, after a new batch of warrants vested last week. (Sportico)

TECH:

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  Apple (AAPL) - Apple expanded its Face ID repair programme to the iPhone X, which was initially excluded from the programme. (MacRumors)


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  Samsung Electronics Co. (SSNLF) - Sees Q1 revenue at KRW 77.0trln (exp. 74.9trln), and sees Q1 operating profit KRW 14.1trln (exp. 13.4trln). (Samsung)


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  HP Inc. (HPQ), Berkshire Hathaway (BRK) - HP Inc. gained 10% after hours following a filing which showed Berkshire Hathaway had accumulated an 11.4% stake in the company worth USD 4.2bln. (Barron's)


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  Alphabet (GOOG) - Russia announced punitive action against Google, stating that YouTube has become the main platform for spreading fake information about the Russian military campaign in Ukraine. (Reuters)


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  Sprinklr (CXM) - Rose 8% after hours following results/guidance. Q4 adj. EPS -0.05 (exp. -0.09), Q4 revenue USD 136mln (exp. 130.4mln). Sees Q1 adj. EPS between -7c and -6c (exp. -0.06), and sees Q1 revenue between USD 140-142mln (exp. 135.9mln). Sees FY23 adj. EPS midpoint at -0.21 (exp. -0.20), and sees FY23 revenue between USD 607-615mln (exp. 589mln). (CXM)


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  SoFi Technologies (SOFI) - Tumbled over 6% in after hours as it cut guidance due to President Biden's directive to extend federal student loan payment moratoriums from May until the end of August. (Bloomberg)


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  Ericsson (ERIC) - Senior VP and head of Managed Services is to leave in August. (ERIC)

CONSUMER CYCLICAL:

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  Levi Strauss & Co. (LEVI) - Rose 3% after hours following results. Q1 adj. EPS 0.46 (exp. 0.42), Q1 revenue USD 1.6bln (exp. 1.55bln). Noted strong consumer demand and solid momentum in Q1. Reiterates FY22 adj. EPS view of between 1.50-1.56 (exp. 1.55), and FY22 revenue view between USD 6.4-6.5bln (exp. 6.45bln). CFO said gross margins started the year very strong, and "up big time" Y/Y. (LEVI)


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  Norwegian Cruise Line Holdings Ltd. (NCLH) - CEO said its entire fleet will be operating by May, stating that the pandemic was not over, but it was behind the cruise line. CEO notes pent up demand, which is being reflected in bookings. CEO focussed on debt repayment over the coming years. (CNBC)


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  888 Holdings (EIHDF) - To announce plans for a smaller than expected cash call to fund takeover of William Hill's non-US components. (Sky)

CONSUMER STAPLES:

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  Walmart’s (WMT) - Flipkart IPO valuation target raised to between USD 60-70bln (prev. 50bln), sources said; aims for US listing early-to-mid 2023. (Reuters)


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  Costco Wholesale Corporation (COST) - March net sales USD 21.6bln (+18.7% Y/Y). Total Comp Sales +17.2% (prev. +14.0% in Feb); US comp sales ex-gasoline/FX 12.7% (exp. 9.2%). (COST)

INDUSTRIALS:

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  EVs - Senior officials met major auto execs – including Tesla (TSLA) CEO and General Motors (GM) CEO – and said "there was broad consensus that charging stations and vehicles need to be interoperable and provide a seamless user experience, no matter what car you drive or where you charge your EV." (Reuters)


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  Tesla (TSLA) - China regulators say Tesla has recalled 127,785 imported and China-made ‘Model 3’ vehicles. (Reuters)


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  Atlantia (ATASY), Blackstone (BX) - Blackstone reportedly looking into a bid for Atlantia. (Bloomberg)


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  BMW (BMWYY) - Q1 Group deliveries -7.3% Y/Y at 596k; Europe deliveries -7.8%, China -9.2%, US +3.7%. (Newsquawk)


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  Airbus (EADSY) - Q1 deliveries +13% Y/Y. (Reuters)

FINANCIALS:

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  Capital One Financial Corporation (COF) - Authorised additional USD 5bln share buyback, starting in Q3. (MarketWatch)


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  Swiss Re (SSREY) - The world's second largest reinsurer targets ROTE of 14% in 2024, which would be achieved via contributions from L&H Re and cost discipline. (Yahoo)

REAL ESTATE:

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  AvalonBay Communities (AVB) - Fell 2.3% after hours; priced an underwritten public offering of 2mln shares for expected gross proceeds of approximately USD 497.2mln. (AVB)

HEALTH CARE:

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  Sanofi (SNY) - EU Commission approves Dupixent for children aged 6-11 with severe asthma. (Newsquawk)

07 Apr 2022 - 09:49- EquitiesResearch Sheet- Source: Newsquawk