US EARLY MORNING: Markets are cautious ahead of today's numerous risk events (ECB, EU leader's meeting, US CPI, Ukraine/Russia)

EQUITIES: APAC equities rose after a positive lead from Wall Street, where gains were underpinned by Ukraine/Russia optimism and easing oil prices; the European session started flat after Wednesday’s short-squeeze, but the downside resumed shortly after the open. US equity futures are trading lower by 0.4-0.9% (ES -0.4%, YM -0.5%, NQ -0.6%, RTY -0.9%), but ultimately, continue to consolidate within the ranges seen in recent days ahead of today’s key risk events, which include: ECB meeting (our preview is here; analysts expect hawkishness to be dialled back amid Ukraine/Russia uncertainties), the US CPI report for February (further upside expected, primer here), talks between Ukraine/Russia foreign ministers (Russia says it will not concede a single negotiating point, while Ukraine sees little hope of breakthrough – currently, both are expected to hold separate post-meeting press conferences, but there has been some hints of compromise this week, and a positive outcome could lead to talks between their respective Presidents), while EU leaders will meet in Versailles (our preview is here; they’ll be focussing on energy and defence today, and finance tomorrow – we watch for any details about the ‘massive’ EU issuance to finance these).

TREASURIES: Treasuries have a mild bid amid the cautious macro tone, and ahead of key event risks, although yields aren’t too far off neutral; the curve shape is biased towards slight flattening, but the magnitudes are not significant. Treasuries will be influenced from multiple angles today: the inflation data for February is expected to show continued upside, but unless there is an unforeseen spike above the consensus range (of 7.3-8.1% Y/Y for the headline, and 5.9-6.6% Y/Y for the core), it is likely that the Fed sticks to Chair Powell’s guide of +25bps rate rise at next week’s confab. EGBs could provide Treasuries with a dovish impulse, with the ECB set to dial down its hawkishness as Europe faces uncertainties from Ukraine/Russia, but still, many analysts note that Europe is far more exposed than the US, so the degree to which Treasuries sympathise with EGBs might be limited given that the Fed will apparently not be slowing down its policy normalisation (markets are pricing around six 25bps rate hikes this year, up five last week but still short of the seven priced before the Ukraine/Russia conflict). There could be further influence from Europe though via massive joint issuance the bloc is planning in order to finance energy and defence investments – the leader’s summit today and tomorrow will be eyed for details. There is also the influence from falling energy prices, which could provide support, as well as the tenor of incoming geopolitical headlines. The US Treasury will wrap up this week’s supply with a 30s auction in the afternoon.

CRUDE: Oil benchmarks are seeing a bounce this morning after an enormous slide on Wednesday; WTI +3.70, Brent +4.87. The oil contracts slid after Ukraine appeared willing to compromise in an effort to end the conflict with Russia. Additionally, the UAE said it was in favour of an oil production increase, and would be encouraging OPEC to consider higher output, adding to the bearish pressures. But an OPEC+ delegate later said that the UAE had not discussed OPEC+ output proposal with allies. Markets could also be supported after Iraq seemingly pushed-back on the UAE proposal, while the latter’s energy minister said it was committed to the existing monthly production adjustment mechanism. Nevertheless, ING notes the mixed messages from the UAE do not help amid the current market volatility.

DOLLAR: The Dollar Index regains some poise after Wednesday’s drop, which was driven by a seemingly positive macro environment where equities rallied and crude prices pared back, easing fears on inflation. The action from yesterday has been framed as a short squeeze by many participants, and it appears as though the cautious mood has returned in US pre-market trading ahead of today’s numerous risk events. The DXY is trading a little higher, with a 98.00 handle. Activity currencies are mixed, with the antipodes gaining (they’ve been supported by commodity price rises recently, while their geographical location insulates them somewhat, while RBA Governor Lowe has been talking tough on inflation). The SEK is lower vs the USD (the SEK has been a decent risk proxy for the Ukraine situation), while the GBP is flattish. EUR is below neutral ahead of today’s ECB, but above 1.1050. Havens JPY and CHF are about flat against the buck, while XAU continues to slide, now trading with a 1980 handle vs highs of nearly 2070 earlier this week. As noted above, there are a number of different macro impulses that will sway trading conditions today.

EQUITY NEWS:

CONSUMER:

• 
  Amazon (AMZN) - Gained 6% after hours; board authorised a 20-for-1 stock split and share repurchases of up to USD 10bln. (AMZN)


• 
  Starbucks (SBUX) - Workers at three More NY-area stores have voted to unionise. (NYT)


• 
  Peloton (PTON), Apple (AAPL) - Peloton users can now track performance on Apple Watch. (PTON)


• 
  Hugo Boss (BOSSY) - FY21 revenue EUR 2.79bln (exp. 2.73bln), EBIT EUR 228mln (exp. 204.1mln). Declares annual dividend of 0.70/shr (prev. 0.04/shr). Sees 2022 sales growth at a record +10-15% level. Russian/Ukraine markets accounted for 3% of group sales in FY21; said it was difficult to assess the impact from the war. (Newsquawk)


• 
  Accel Entertainment (ACEL) - Q4 EPS 0.33 (exp. 0.19), Q4 revenue USD 192mln (exp. 191.6mln). Reiterates FY22 pro forma revenue between USD 1.07-1.18bln (exp. 931mln), and reiterates FY22 pro forma adj. EBITDA seen between USD 182-198mln. (ACEL)


• 
  Carlsberg (CABGY) - Suspended earnings guidance, reviewing options for Russian business. (Newsquawk)

INDUSTRIALS:

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  Tesla (TSLA) - Tesla hikes prices for Model 3 and Model Y cars in China and the US. (Reuters)


• 
  Boeing (BA), Raytheon (RTX) - FAA is finalising three safety directives for some grounded Boeing 777 planes with Pratt & Whitney 4000 engines that will allow them to return to service. (Reuters)


• 
  Delta Airlines (DAL), Air France-KLM (AFLYY) - Air France makes no comment on reports that Delta Airlines and Air France were looking at a majority stake in ITA Airways. (Newsquawk)


• 
  Hapag-Lloyd (HPGLY) - FY21 revenue EUR 26.356bln (prev.14.577bln), EBITDA EUR 12.84bln (prev. 3.08bln). EBITDA margin 48.7% (prev. 21.1%). Notes significantly improved freight rates on strong Asia demand. Looking ahead, expects earnings to be very strong in H1, anticipates strained global supply chains will ease in H2 which should lead to a normalisation of earnings. Says view subject to considerable uncertainty. (Newsquawk)


• 
  Johnson Controls International (JCI) - Raises quarterly dividend to 0.35/shr (prev. 0.34). (JCI)


• 
  Embraer (ERJ) - Q4 EPS 0.31 (exp. 0.11), Q4 revenue USD 1.3bln (exp. 1.5bln). Noted firm order backlog of USD 17bln at end-Q4. Delivered 55 jets in Q4, of which 16 commercial aircraft and 39 executive jets (26 light and 13 mid-size). In 2021, a total of 141 jets were delivered comprised of 48 commercial aircraft and 93 executive jets (62 light and 31 mid-size). Sees FY22 revenue between USD 4.5-5bln (exp. 5.3bln). Sees FY22 commercial jet deliveries between 60-70, FY22 executive jet deliveries between 100-110; sees FY22 adj. EBITDA margin 8-9%, and sees FY22 FCF of at least USD 50mln. (ERJ)


• 
  Volkswagen (VWAGY) - CEO said that an extended war in Ukraine risks being "very much worse" for the regions' economy than COVID. (FT)


• 
  Spirit Aerosystems (SPR), Airbus (EADSY) - The two partner to develop the next generation "Wings of CityAirbus". (Flight Global)


• 
  Royal Boskalis Westminster (RBWNY) - Confirms offer proposal from HAL NV. (MarketWatch)

FINANCIALS:

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  Allianz (ALIZY) - Pimco unit risks losing billions if Russia defaulted; exposed to a derivative bet of at least USD 1.1bln, holds USD 1.5bln of Russian sovereign bonds. (FT)


• 
  Deutsche Bank (DB) - Reports very limited Russia exposure. Has reduced exposure and local footprint significantly since 2014. Credit exposures only a very small portion of its overall loan portfolio. (Newsquawk)


• 
  Credit Suisse (CS) - Net credit exposure to Russia CHF 848mln; credit risk exposure to Ukraine/Belarus not material. In the short term, the increase in trading and hedging business activity is expected to be offset by a reduction in capital market issuances due to the rise in volatility as well as by higher credit provisions. (Newsquawk)

TECH:

• 
  Alphabet (GOOG) - To pause Google Play billing system in Russia due to payment system disruption. (Newsquawk)


• 
  CrowdStrike Holdings (CRWD) - Gained 14% in after hours trade as Q4 metrics topped expectations, and gave solid guidance. Q4 adj. EPS 0.30 (exp. 0.20), Q4 revenue USD 431mln (exp. 411mln). Sees Q1 EPS between 0.22-0.24 (exp. 0.17), and sees Q1 revenue between 458.9-465.4mln (exp. 440.8mln). FY23 adj. EPS seen between 1.03-1.13 (exp. 0.91), and FY23 revenue seen between USD 2.133-2.163bln (exp. 2.01bln). (CRWD)


• 
  Sony (SONY) - PlayStation is suspending all hardware and software shipments in Russia (Verge). Separately, eight more women allege sexism at PlayStation (Axios).


• 
  Asana (ASAN) - Dropped by over 20% in after hours on weak guide for next quarter. Q1 view. Q4 adj. EPS -0.25 (exp. -0.28), Q4 revenue USD 111.9mln (exp. 105.2mln). Sees Q1 adj. EPS between -0.36 to -0.35 (exp. -0.27), and sees Q1 revenue at USD 115mln (exp. 111mln), sees Q1 operating losses at USD 67mln. FY23 revenue seen between USD 527-531mln (exp. 506mln). (ASAN)


• 
  Marqeta (MQ) - Rose 13% in after hours trade on decent results and guidance. Q4 EPS -0.07 (exp. -0.07), Q4 revenue USD 155.4mln (exp. 137.7mln). Total processing volume +76% Y/Y to USD 33bln in Q4. Sees Q1 revenue growth of 48-50% (exp. 137.2mln), GMs between 43-44%, adj. EBITDA margin between -8% to -9% (exp. -11.6%). FY22 revenue seen 'up at least mid-30% range' (exp. 661.3mln). (MQ)

COMMUNICATIONS:

• 
  Vivendi (VIVHY) - FY21 revenue EUR 9.57bln (exp. 9.47bln). EBITA 690mln (exp. 556mln). Adj. net 649mln (exp. 545mln). Declares USD 0.25/shr dividend. Financial exposure to Ukraine/Russia is very low; not possible to analyse consequences yet. (Newsquawk)


• 
  ITV (ITVPY) - Appoints Andrew Cosslett as Chair, to succeed Peter Bazalgette. (Deadline)

MATERIALS:

• 
  Rio Tinto (RIO) - To sever all commercial ties with Russian business (note: has alumina JV with Russia’s Rusal in Queensland). (Bloomberg)

ENERGY:

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  Chevron (CVX), Phillips 66 (PSX) - A JV between the two agreed to spend USD 118mln to upgrade and clean three petrochemical plants on the Gulf Coast, and pay a USD 3.4mln civil penalty as part of a settlement for violating federal air quality rules. (Reuters)

HEALTH CARE:

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  Bayer (BAYRY) - Bayer sells its Environmental Science Unit for USD 2.6bln to Cinven. (MarketWatch)


• 
  Opioids - Judge overseeing Purdue Pharma's bankruptcy approved USD 6bln opioid settlement funded by its owners, overruling objections from the DoJ and states that opposed the deal. (Reuters)

UTILITIES:

• 
  Eni (E) - Suspended new contract procurement of oil and oil products from Russia. (Newsquawk)

10 Mar 2022 - 09:54- EquitiesResearch Sheet- Source: Newsquawk