US EARLY MORNING: Index futures go flat after Russia warnings; busy day ahead of long weekend

EQUITIES: European bourses opened cautiously higher ahead of today’s ECB policy meeting, while APAC markets were mostly up after a positive lead from Wall Street. However, European indices and US index futures pared up gains in wake of remarks made by Russia’s Security Council Deputy Chair, who warned that were Sweden and Finland to join NATO, there could be no more talk of a nuclear-free Baltic; both have recently been increasing efforts to join the alliance. While European indices are still showing gains, US index futures are flat: NQ +0.2% ES +0.0%, YM +0.0%, RTY -0.1%. After JPMorgan’s mixed results on Wednesday, financials will continue to remain in focus on Thursday with earnings due in the premarket from Goldman Sachs, Morgan Stanley, Citi, and Wells Fargo. Specifically, there will be focus on net interest income and net interest margins – JPM gave solid updates on both, as well as a decent outlook for the former accompanied by constructive commentary on loan growth; there will also be attention on provisions for credit losses, after JPM's build was much larger than analysts were expecting – the bank has explained that this was more to do with a higher probability (from low levels) of a Fed-induced recession in response to the current inflationary environment, rather than any deterioration in credit standards.

TREASURIES: Yields are narrower across the curve by 0-2bps; the shape of the curve is mixed, but major spreads aren’t more than a couple of basis points off neutral. The complex may take cues from EGBs in the morning as the ECB policy announcement and subsequent press conference from President Lagarde could provide some clues about how the central bank will begin to dial-back asset purchases, and any sequencing ramifications for eventual rate hikes. More domestically, recent Fed commentary has not leaned back on a 50bps rate hike in May; money markets imply over 90% chance of this outcome, and sees rates rising to 2.25-2.50% by the end of the year, with some risks of 2.50-2.75%. One of the key debates is what the Fed will do when it gets to neutral, and the implications for the eventual terminal rate; some Committee members want to take stock of the landscape then, but others have suggested a move above neutral could be necessary to tame inflation. Data-wise, retail sales data for March will be eyed, along with weekly initial jobless claims data.

DOLLAR: The Dollar Index is trading around flat around 99.68 having vaulted the 100.00 mark in recent sessions. After nine sessions of weakening against the buck, the yen is a touch lower, although rate differentials may come into play for the Japanese currency through the ECB meeting. The EUR itself is trading with modest gains amid the constructive equity landscape and favourable rate differentials vs the USD; ING warns that Lagarde may fall short of the market’s hawkish expectations as she keeps options open for the rest of the year, and from the dollar-side, the bank suggests that the softening differentials in recent sessions (‘peak inflation’ arguments post this week’s CPI data) could be unwound as supply chains remain constrained. Elsewhere, activity currencies are trading a touch higher (led by NZD and SEK, with the GBP and AUD flat); the EMFX screen is not showing much green, with the risk-on proxy ZAR currently lower by 0.6%, while the TRY is flat ahead of the CBRT rate decision.

CRUDE: Crude benchmarks shrugged-off a larger-than-expected inventory build this week, instead taking cues from geopolitics, where major oil traders are set to lower purchases of Russian barrels in the months ahead, adding to the market tightness. Contracts are trading with a softer tone on Thursday, however, with some desks noting thinner volumes as we approach the long weekend. Crude prices gradually moved off lows in wake of punchy geopolitical rhetoric from Russia’s Security Council Deputy, highlighting that the complex is still vulnerable to geopolitical risk premium which may trump supply dynamics in the short-term. On the other side, we are attentive to the possibilities that Chinese authorities could add more policy support in the weeks ahead to cushion the downside from COVID lockdowns, and this could support the demand-side of the crude equation.

DAY AHEAD:

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  DAY AHEAD - US retail sales, weekly initial jobless claims, prelim University of Michigan Sentiment, import/export prices, business inventories; Canada manufacturing sales, wholesale trade. In central banks, the ECB (preview link below) and CBRT policy meetings (primer here). Full day ahead calendar here.


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  US RETAIL SALES - Forecast to rise +0.6% M/M in March (prev. +0.2%), and the ex-autos measure is seen rising +1.0% M/M (prev. +0.2%). Auto sales likely dragged for the second month, but higher gas prices will boost the headline. Ahead, consumer spending risks may be tilted to the downside. (Newsquawk)


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  ECB PREVIEW - Announcement at 12:45BST/07:45EST, press conference from 13:30BST/08:30EDT. The press conference will offer Lagarde an opportunity to provide a stock-take on how the EZ is responding to the Ukraine crisis. Traders will be mindful of any hints of an early end to APP and a potential 2022 rate hike. (Newsquawk)


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  EARNINGS - Corporate earnings due April 14th include UNH, WFC, GS, MS, C; full list and expectations here.

EQUITY NEWS:

KEY LEVELS (via Credit Suisse):

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  SPX: 4336-41, 4376, 4391-99, 4424, 4438, 4506, 4520-25, 4559-61, 4570, 4593.


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  NDX: 13827, 13878, 14000, 14014, 14143, 14490, 14624-39, 14701-24, 14783, 14821.


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  RUT: 1860-62, 1882-1901, 1921, 1933, 1946, 2018, 2031, 2041-50, 2068-72, 2103-07.

TECH:

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  Apple Inc. (AAPL) - COVID lockdowns in China may be contributing to delays for MacBook Pro laptops, where consumers are seeing delivery Estimates pushed into June. (Bloomberg)


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  Taiwan Semiconductor Manufacturing Company (TSM) - Q1 revenue TWD 491bln (prev. 362bln), net profit TWD 202.7bln (exp. 184.7bln), gross margin 55.6%. Said it expects chip demand to continue in the long-term, believes capacity will remain tight this year. Expects another strong year, and guided Q2 revenue view above expectations. It added that it was working to address supply chain challenges with tool suppliers. (TSM)


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  TomTom (TMOAY) - Reported a slightly wider-than-expected loss though confirmed FY22 guidance. (TMOAY)

CONSUMER CYCLICAL:

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  Amazon (AMZN) - Will impose an average fuel and inflation surcharge of 5% on merchants who sell in the US, as it responds to rising costs. The measure is effective April 28th, and is not permanent. (Reuters)


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  eBay Inc. (EBAY), Meta Platforms (FB) - eBay rose 0.4% after the bell. It has appointed Eddie Garcia Chief Product Officer. He joins eBay from Meta, where he was Head of Commerce, Facebook App, responsible for Marketplace efforts. (EBAY)


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  Starbucks Corporation (SBUX) - Fell 0.25% after the bell. The coffee chain is preparing to expand worker benefits, but CEO is pushing against a unionisation campaign at its US stores; CEO said new benefits cannot legally be extended to unionised locations. (WSJ)

CONSUMER STAPLES:

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  Costco Wholesale Corporation (COST) - Gained 0.3% in after hours. Increased quarterly dividend to 0.90.shr (prev. 0.79/shr). (COST)

FINANCIALS:

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  Barclays (BCS) - Reportedly facing scrutiny around pension schemes, could take an early GBP 1.25bln hit. (FT)


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  Goldman Sachs Group Inc (GS) - Earnings due 14/Apr at 12:30BST/07:30EDT. The street expects Q1 EPS of 8.82, and revenue of USD 11.83bln. (Newsquawk)


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  Morgan Stanley (MS) - Earnings due 14/Apr at 12:30BST/07:30EDT. The street expects Q1 EPS of 1.68, and revenue of USD 14.27bln. (Newsquawk)


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  Wells Fargo & Company (WFC) - Commits USD 210mln to help minority families as part of efforts to advance racial equity in homeownership. Separately, earnings due 14/Apr at 12:00BST/07:00EDT; the street expects Q1 EPS of 0.80, and revenue of USD 17.80bln. (WFC, Newsquawk)


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  Credit Agricole (CRARY), Banco BPM (BNNCY) - Credit Agricole reportedly has no plans to gain control of Banco BPM. (Reuters)


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  S&P Global Inc. (SPGI) - Appointed Daniel Yergin as Vice Chairman of the company following the completion of its merger with IHS Markit. (SPGI)

INDUSTRIALS:

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  Mercedes Benz (DMLRY) - EV vehicle broke the 1,000km mark on a single charge. (The Verge)


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  Blackstone (BX), Atlantia (ATASY) - Blackstone and Benetton Family offer to acquire Atlantia for EUR 23/shr (vs prior close 21.89). (Reuters)


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  Tesla (TSLA) - US judge said the automaker was liable to a black elevator operator who claimed it ignored racial abuse; but the judge lowered an almost USD 137mln award to USD 15mln. (CNBC)


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  Trucking companies - Strong freight demand seen in the pandemic appears to be waning, according to the WSJ. The journal said that shipping demand and capacity are now coming into balance, and shipping rates are sliding amid high inflation and sagging consumer confidence. (WSJ)

MATERIALS:

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  Dow Inc. (DOW) - Up 0.7% after hours. Approved a new USD 3bln share buyback programme, which is additive to the current outstanding programme (approx. USD 775mln of that previous authorisation remains). Declared dividend of 0.70/shr (exp. 0.71, prev. 0.70). (DOW)


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  Eldorado Gold Corporation (EGO) - Fell 3.4% after hours. Prelim total gold production of 93,209oz (prev. 111,742 Y/Y) in Q1 2022. Eldorado noted that production in January and February was impacted by higher-than-anticipated absenteeism related to the COVID surge. Maintained FY22 production guidance of 460-490k oz. (EGO)

COMMUNICATIONS:

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  Ericsson (ERIC) - Earnings missed on contract delays and Russia provisions, and warns of possible fine over Iraq scandal. (Reuters)


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  Meta Platforms (FB) - India regulator NPCI approved an additional 60mln users on the Unified Payments Interface for WhatsApp. With this approval, WhatsApp will be able to expand the service to 100mln users. (NPCI)


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  Publicis (PUBGY) - Topped expectations by noted uncertainties ahead. (PUBGY)

HEALTH CARE:

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  UnitedHealth Group Inc (UNH) - Earnings due 14/Apr at 10:55BST/05:55EDT. The street expects Q1 EPS of 5.38, and revenue of USD 78.79bln. (Newsquawk)


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  Genmab A/S (GMAB), AbbVie Inc. (ABBV) - Announced topline results for Epcoritamab from phase 1/2 trial in patients with LBCL. Data from the clinical trials to be presented at a future medical meeting. Will engage global regulatory authorities to discuss next steps. (GMAB)


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  Protagonist Therapeutics, Inc. (PTGX) - Tumbled over 30% after hours. after it announced that the FDA intends to rescind the Breakthrough Therapy Designation for its rusfertide product candidate in polycythemia vera. (PTGX)


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  Sanofi (SNY) - Announced positive results from a study evaluating rilzabrutinib. (SNY)


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  Valneva (VALN) - UK approves Valneva's COVID vaccine. (Guardian)

14 Apr 2022 - 09:41- EquitiesResearch Sheet- Source: Newsquawk