US EARLY MORNING: Index futures continue upside; many looking through yield curve inversion signals

EQUITIES: APAC equities rose after a positive handover from Wall Street. European equities are advancing, underpinned by geopolitical optimism (delegations have arrived in Turkey for ceasefire talks, Russia no longer calling for denazification, prepared to allow Ukraine to join EU if it remains militarily neutral) and lower crude oil prices (geopolitical optimism, China lockdowns weighing on demand side, OPEC+ to keep policy steady this week). Yields continue to rise on an expected hawkish Fed normalisation trajectory, but this is not derailing equity momentum just yet (RTY +0.5%, YM +0.3%, ES +0.3%, NQ +0.3%). The ES is currently on course to print a fourth day of gains, and has added over 7% vs levels seen just 10 sessions ago. We have recently noted that many desks are suggesting that ‘this time might be different’ regarding the recessionary signalling power of Treasury curve inversions; this is a point JPMorgan has reiterated to its clients. The bank notes that "from the point of curve inversion to the actual peak of the equity market, which typically takes place around a year later, S&P 500 was higher by 15%," adding that "the clock has not started ticking yet, and the upcoming quantitative tightening could matter for the timing, delaying proceedings." JPM does not see an outright recession this year: it notes that while the 2s10s curve has been flattening -- its inversion has been historically an accurate recession predictor – the 3mth/10yr spread (whose inversion has historically been another leading recession indicator) has been widening. "Crucially, the flat/inverted yield curve was historically a good cycle signal because it would be indicating that financing conditions have become highly restrictive, but we do not see this to be the case at present," the bank writes, "real rates averaged +200bp at the time of past curve inversions, vs current negative, while bank lending standards are still easing and they can support continued credit expansion." The bank has recently argued that Fed tightening can cause volatility, but this weakness gets absorbed and markets move higher, and accordingly, it still believes that recession is not a base case in the US or even in Europe.

TREASURIES: Yields are higher by 2-4bps across the Treasury curve; the shape of the curve is flattening (2s10s -4.7bps, falling sub 8bps today, inching closer to zero – an inversion would get a lot of attention due its historical signalling power, although as noted above and in recent notes, many desks are suggesting this time may be different). Underperformance is once again concentrated in the short-end of the curve, where 2yr yields have risen to a fresh three-year high around 2.44%. Monday’s 2yr auction was soft, although the 5yr sale was constructive, and the 2s5s spread continues to narrow on Tuesday (-4bps). 5s30s remains inverted, but at around -2bps vs -7bps at one point on Monday. Money markets imply that there is an 80% chance that the Fed will raise rates by a 50bps increment in May, and see rates rising to 2.25-2.50% by year end (the Fed recently projected a rise to 1.75-2.00% by the end of the year). The Day Ahead features more Fedspeak by way of Fed’s Williams (voter), Harker (2023) and Bostic (2024); there is also 7yr supply. After the US close, API will release weekly energy inventory data. Full Day Ahead here.

EQUITY NEWS:

FINANCIALS:

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  Jefferies Financial (JEF) - Rose 3.7% in after hours after posting Q1 results which topped expectations. Q1 EPS USD 1.23 (exp. 0.88), Q1 revenue USD 1.73bln (exp. 1.55bln), Q1 ROE 16.2%. Authorised share buyback of up to USD 250mln. CEO noted challenging trading environment in Dec and Jan due to anticipated change in Fed policy, exacerbated by difficult capital markets conditions in Feb due to Russia-Ukraine War. CEO noted continued momentum in its advisory business; debt underwriting revenues were "solid"; equity underwriting results were lower Y/Y, consistent with a reduction in industry-wide deal activity; IB backlog "remains strong"; equities net revenues impacted by market volatility and global instability; fixed income net revenues lower due to lower trading volumes in the face of inflation concerns and interest rate uncertainty; asset management net revenues reflect higher asset management fees, offset by lower investment returns and lower revenues from strategic affiliates Y/Y. (JEF)


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  Barclays (BCS) - Pressured in London trading after major investor unloads 3% stake at 6-8% discount; following reports of compliance issues in sale of US structured products. (Reuters)


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  Crypto - US House Financial Services Committee to hold a hearing on "The Future of Money: Assessing the Benefits and Risks of a US Central Bank Digital Currency" at 10:00EDT/15:00GMT. (House)


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  American International Group (AIG) - To rebrand its Life & Retirement Business as 'Corebridge Financial' when it becomes a public company. (AIG)


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  Western Union (WU) - Announced launch of its money transfer services with ICB in South Korea. (WU)


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  Raymond James Financial (RJF) - To acquire technology-driven fixed income market maker SumRidge Partners; no terms. (RJF)

TECH:

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  Amazon (AMZN), Apple (AAPL), Alphabet (GOOG) - DoJ backs big tech antitrust bill, said it views the rise of dominant platforms as presenting a threat to open markets and competition, with risks for consumers, businesses, innovation. (WSJ)


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  Intuit (INTU) - To challenge FTC complaint that alleges its advertising practices misdirected consumers who were eligible for free tax filing software towards its paid products. (RTTNews)


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  Ambarella (AMBA) - Announced that Brian White has joined the company, will be appointed CFO after FY 2022 Annual Report. (AMBA)

COMMUNICATIONS:

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  Meta Platforms (FB) - US Chamber of Commerce urges DC appeals court to reject appeal by US states to revive antitrust lawsuit vs Facebook. Separately, announced it was testing feature to help people discover global social movements and on Instagram. (Reuters, FB)


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  Yandex (YNDX) - FTSE Russell to remove search engine Yandex, primarily aimed at Russian and Russian language users, from all its indexes. (FTSE)


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  Dave & Buster's Entertainment (PLAY) - Slipped over 8% as Q4 earnings missed expectations. Q4 EPS 0.52 (exp. 0.60), Q4 revenue USD 343.1mln (exp. 365mln), Q4 SSS -2.6%. Said Q1 business was tracking above 2019 levels so far, and comparable sales +5.4% vs same period in 2019. (PLAY)


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  Telefonica (TEF) - Telefonica and DAZN reportedly sign EUR 1.4bln deal to share Spanish soccer league broadcasting rights for the next five seasons. (El Confidencial)

ENERGY:

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  Murphy Oil (MUR), ExxonMobil (XOM) - Drilling has concluded at the Cutthroat-1 exploration well offshore Brazil. Presence of hydrocarbons was not found. (MUR)


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  EQT Corporation (EQT) - Has achieved IG standard from two credit rating agencies, Standard & Poor's and Fitch Ratings. Accordingly, EQT expects an improvement in liquidity and reduced interest expense. (EQT)


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  Petroleo Brasileiro (PBR) - Brazil President Bolsonaro replaces Petrobras CEO following growing discontent over fuel prices; CEO had only been Petrobras' top boss for about a year. (Bloomberg)

INDUSTRIALS:

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  Boeing (BA) - Announced Ted Colbert as President and CEO of its Defense, Space and Security business. Colbert succeeds Leanne Caret who is retiring. Stephanie Pope appointed as president and CEO of Boeing Global Services, succeeding Colbert. (BA)


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  Boeing (BA) - Awarded USD 122.7mln Defense Logistics Agency contract. (DoD)


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  Lockheed Martin (LMT) - Awarded USD 92.5mln Navy contract modification. Separately, Canada selects LMT as preferred bidder to supply 88 new fighter jets, a sign it is set to win the multibillion-dollar contract, Reuters said. (DoD, Reuters)


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  BAE Systems (BAESY) - Awarded USD 89mln US Navy contract. (DoD)


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  FedEx (FDX) - President and COO Raj Subramaniam to be promoted to President and CEO, effective June; Frederick Smith, Chairman and Chief Executive Officer, will become Executive Chairman. (FDX)


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  Southwest Airlines (LUV) - Southwest reaches agreement with IAM union  for more than 6,000 customer service employees. (LUV)


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  Stellantis (STLA) - To cut workers at Illinois Jeep plant in an effort to operate in a more sustainable manner; did not disclose precise number of job cuts. (Detroit News)


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  Porsche (POAHY), Volkswagen (VWAGY) - Porsche supports Volkswagen's plan to IPO Porsche; no final decision made. Posts 2021 post-tax group result EUR 4.6bln (prev. EUR 2.6bln), sees 2022 post-tax group result between EUR 4.1bln to 6.1bln. (Newsquawk)

MATERIALS:

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  Polymetal (POLY LN) - Confirmed it was mulling splitting Kazakhstan and Russian assets. Is evaluating various options to maximise shareholder value, including the potential modification of asset holding structure. Early-stage deliberations are underway. (FT, Reuters)

UTILITIES:

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  Southwest Gas Holdings (SWX) - Commenced an underwritten public offering of USD 400mln of common stock; intends to use the proceeds to repay outstanding borrowings that was used to fund the Company's acquisition of Questar Pipelines. Shares said to offer at USD 72-75/each (closed at USD 79.43); activist investor Carl Icahn said he'd purchase USD 400mln of common stock in Southwest at USD 82.50/shr subject to "elimination of the poison pill". (SWX, Newsquawk)

HEALTH CARE:

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  NeoGenomics (NEO) - Fell over 20% after hours, Board and CEO Mark Mallon agreed that Mallon will step down as CEO; NEO said this was not the result of any disagreements about strategy, inappropriate actions, or any violation of company policy or any accounting irregularity. NEO warned Q1 2022 revenue may be below the low end of its prior USD 118-120mln guidance, while Q1 EBITDA will be below the low end of its prior guidance of USD -15mln to -12mln; larger than anticipated EBITDA loss primarily driven by higher than anticipated clinical services cost of goods sold. (NEO)


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  Novo Nordisk (NVO) - FDA approved a 2.0 mg dose of Ozempic (once-weekly semaglutide subcutaneous injection), a glucagon-like peptide-1 (GLP-1) analogue for the treatment of adults with type 2 diabetes. (NVO)


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  AstraZeneca (AZN) - Ondexxya approved in Japan for reversal of acute major bleeds in patients on Factor Xa inhibitors. (AZN)


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  Roche (RHHBY) - CEO said it is losing money in Russia, but remains committed to providing medication. (Reuters)

CONSUMER CYCLICAL:

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  Ball Corporation (BLL) - Will reduce Russian operations immediately at its three manufacturing facilities; is pursuing the sale of its Russian business to a new owner. In 2021, Russian business represented approximately 4% of total net sales, 8% of total comparable operating earnings. (BLL)


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  Boyd Gaming (BYD) - To acquire Pala Interactive for USD 170mln. (BYD)

29 Mar 2022 - 09:57- Fixed IncomeResearch Sheet- Source: Newsquawk