US EARLY MORNING: Nasdaq-100 futures are bouncing higher as Alphabet (GOOG) soothes fears regarding mega-cap earnings

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  EQUITIES: APAC equities rose after a decent lead from Wall Street; European shares also firmed after the open despite mixed earnings. After the recent Netflix (NFLX) and Tesla (TSLA) earnings, there were concerns regarding the health of US mega-caps, although these fears have eased following decent reports from Microsoft (MSFT) and Apple (AAPL) – Alphabet (GOOG) further reassured after hours yesterday, posting an earnings blowout, while semiconductor Advanced Microdevices (AMD) also released solid earnings metrics, providing some confidence that Meta Platforms (FB) report after hours today can conform to the positivity (particularly the decent Google advertising numbers). The read through to Amazon (AMZN), however, is not as clear cut, some analysts warned, leaving some risks around Thursday’s earnings report. For now, the tech/growth complex is encouraged, and NQ futures have reclaimed the psychological 15,000 level. The mood is more subdued among its peers though, with the ES +0.6%, while the YM and RTY are flat. Before we get to more mega-cap earnings, however, there will be focus on today’s ADP data, providing the customary preview to Friday’s jobs report (even though the read through isn’t always clean).


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  TREASURIES: Yields are 1-2bps lower across the Treasury curve, and the shape of the curve is mixed, and doesn’t give us any specific macro read. Today’s ADP report provides the preview for Friday’s jobs data, but with many on the FOMC already comfortable that the US economy has reached, or is very near maximum employment, there might not be as much attention on the headline (particularly since officials have been jawboning a weaker print); instead, the Friday jobs report’s average hourly earnings metrics will be eyed as a gauge on inflationary pressures. Tuesday’s ISM manufacturing survey saw the prices component rise against expectations of a decline, somewhat challenging the notion that inflation is set to ease; however, the data was for January, where many US data prints suffered from the impact of Omicron, and analysts still note that base effects will mean headline inflation will ease in the months ahead, which may provide cover for Fed officials to continue managing the hawkish rate trajectory expectations that have developed in wake of the January FOMC. According to Refinitiv data, money markets are still assigning the equivalent of four 25bps hikes to the Federal Funds Rate target by the end of this year, with some probability of a fifth.


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  DOLLAR: The Dollar Index is trading a little beneath neutral, with ranges narrow overnight with China participants away for the Lunar New Year. The EMFX risk barometers – like the ZAR, and TRY ahead of tomorrow’s inflation report – are trading a little negative, while activity FX like GBP, NZD, CAD and AUD aren’t too far off neutral despite risk sentiment in equity land quite constructive at pixel time, perhaps signalling that some macro caution may be warranted ahead of today’s ADP jobs data, and the BLS jobs report on Friday. Dollar’s counterparts might also have something to day about that on Thursday, where the ECB and BoE updates may serve to engineer some of the monetary policy divergence plays we have seen of late (the ECB is going to have to manage hawkish market expectations, while the BoE will likely fire a hike and end QE reinvestments).


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  CRUDE: Crude benchmarks are trading higher by around USD 0.30/bbl after the API reported a surprise crude draw in the week; Crude -1.65mln (exp. +1.5mln); Cushing -1.03mln; Gasoline +5.82mln (exp. +1.6mln); Distillates -2.51mln (exp. -1.5mln). Ahead of today's OPEC+ gatherings, the group will probably stick to easing supply curbs by a nominal 400k BPD in March, despite the rise in oil prices, according to multiple sources quoted by Reuters. The JTC meeting on Tuesday reportedly kept the group's view of world oil demand growth unchanged for this year. Citi's analysts say that the Ukraine situation also has the potential to tighten markets further in the weeks ahead, while periodic outages in places like Ecuador and Libya, and Houthi attacks can add even more stress. That said, Citi warns that news on Iran and the US seeing a consensus on the JCPOA could find prices eroding quickly in anticipation of greater amounts of additional crude coming on line by spring.

WEDNESDAY FEBRUARY 2ND:

• 07:45GMT/02:45EST: France Budget Balance (DEC)


• 08:00GMT/03:00EST: Spain Unemployment Change (JAN)


• 10:00GMT/05:00EST: EZ Inflation (JAN, FLASH)


• 11:00GMT/06:00EST: Mexico FX Reserves (DEC)


• 11:00GMT/06:00EST: Thermo Fisher Scientific Inc (TMO) earnings (preview)


• 12:00GMT/07:00EST: Brazil Industrial Production (DEC)


• 12:00GMT/07:00EST: US MBA Mortgage Applications (28/JAN)


• 12:40GMT/07:40EST: Abbvie Inc (ABBV) earnings (preview)


• 13:15GMT/08:15EST: US ADP Employment Change (JAN)


• 13:30GMT/08:30EST: US Treasury Quarterly Refunding Announcement


• 13:30GMT/08:30EST: Canada Building Permits (DEC)


• 15:00GMT/10:00EST: BoC Dep Gov Gravelle


• 15:30GMT/10:30EST: US Weekly EIA Energy Inventories (28/JAN)


• 16:00GMT/11:00EST: Russia Industrial Production (DEC)


• 21:00GMT/16:00EST: T-Mobile US Inc (TMUS) earnings (preview)


• 21:00GMT/16:00EST: Qualcomm (QCOM) earnings (preview)


• 21:05GMT/16:05EST: Meta Platforms Inc (FB) earnings (preview)


• 21:30GMT/16:30EST: Australia Ai Group Construction Index (JAN)


• 22:00GMT/17:00EST: Australia Markit Services, Composite PMI (JAN, Final)


• Full Daily Economic Releases (February 2nd)


• Full Daily US Earnings Estimates (February 2nd)

EQUITY NEWS:

TECH:

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  Alphabet Inc (GOOGL) - Q4 earnings beat, approved 20-for-1 stock split via special dividend. EPS 30.69 (exp. 27.32), revenue 75.33bln (exp. 72.13bln). Google Services revenue USD 69.40bln (exp. 66.64bln), advertising revenue USD 61.24bln (exp. 58.2bln, vs 46.2bln Y/Y), Google Cloud revenue USD 5.54bln (exp. 5.42bln), Google Cloud operating loss USD 890mln (exp. loss 820.9mln) (Newsquawk). CFO said slower YouTube ad sales reflected lapping strong brand sales a year ago, FX expected to be a headwind this year, expects a meaningful increase in capex this year. (Newsquawk)


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  Advanced Micro Devices (AMD) - Surged by 10% in extended trade after Q4 results and strong FY22 outlook. Q4 adj. EPS 0.92 (exp. 0.76), revenue 4.8bln (exp. 4.52bln), gross margin 50% (exp. 49.8%). Computer and graphics revenue 2.58bln (exp. 2.44bln), Enterprise, embedded and semi-custom revenue 2.24bln (exp. 2.05bln). Sees Q1 2022 revenue around 5bln +/-100mln (exp. 4.3bln), and for the FY22, revenue is seen at 21.5bln (exp. 19.3bln) (Newsquawk). Executive said expects to grow significantly faster than the market (Newsquawk).


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  PayPal Holdings Inc (PYPL) - Dropped by over 17% in after hours; Q4 profits were soft, earnings in line, while guidance was light. Q4 adj. EPS 1.11 (exp. 1.12), Revenue 6.90bln (exp. 6.86bln). Added 9.8mln new active accounts in the quarter, but abandoned guidance for 750mln accounts by 2025. Processed payments rose 23% to USD 340bln. Sees 2022 Adj EPS 4.60-4.75 (exp. 5.23), and sees 2022 revenue growth of 15-17% (exp. +18%) (Newsquawk). CEO said eBay put USD 1.4bln of pressure on the top line, reduced revenue growth by 700bps; revenue growth was +29% ex-eBay; eBay transition will put an incremental USD 600mln of pressure on top line (Newsquawk).


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  Apple (AAPL) - New iPad buyers still waiting up to nine weeks for delivery, Apple struggling to clear backlog; wait times for new iPhones have shrunk however, from over a month late last year to around 10 days for some models. (Nikkei)


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  Amazon (AMZN) - Adds 25k workers in the UK amid the COVID sales boom. (FT)


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  Amdocs (DOX) - Q1 EPS 1.20 (exp. 1.18), revenue USD 1.11bln (exp. 1.11bln). Sees Q2 EPS between 1.22-1.28 (exp. 1.30). Says it is on track to achieve upper end of FY guidance. (DOX)

COMMUNICATIONS:

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  Electronic Arts Inc (EA) - Q3 earnings and revenue were light, while guidance underwhelmed. Adj. EPS 3.20 (exp. 3.22), Revenue 1.79bln (exp. 2.66bln), Live Services & Other revenue USD 1.17bln (exp. 1.5bln), Full game revenue USD 616mln (exp. 969mln). Q4 adj. EPS seen at 1.38 (exp. 1.49), revenue seen at 1.76bln (exp. 1.82bln); FY adj. EPS view maintained at 6.95 (exp. 7.01), revenue view at 7.53bln (exp. 7.7bln, prev. 7.63bln). (Newsquawk)


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  Match Group (MTCH) - Q4 earnings and revenues miss. EPS -0.60 (exp. +0.50), revenue USD 806mln (exp. 818mln), quarterly payers +15% to 16.2mln (exp. 16.6mln). Said it experienced continuing COVID impacts, especially in certain Asian markets like Japan and more recently due to the emergence of Omicron, which reduced mobility in many markets starting in early December. (Newsquawk)


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  Verizon (VZ) - Reportedly plans to turn on about 2,000 additional 5G C-band towers in February after talks with the FAA. (Reuters)


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  Vodafone (VOD) - Q3 trading update: revenue EUR 11.7bln (prev. 11.2bln). Notes good performance in-line with expectations, on track to attain FY22 guidance. (FT)

CONSUMER CYCLICAL:

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  Starbucks Corp (SBUX) - Lower in after hours; Q1 report misses on higher-than-expected inflationary pressures, increased costs due to Omicron, tight labour market. Q1 Adj EPS 0.72 (exp. 0.79), Revenue USD 8.05bln (exp. 7.95bln); Comp. sales +13% (exp. +13.3%), North America comp. sales +18% (exp. +17.5%), US comp. sales +18% (exp. +17.1%), International comp. sales -3% (exp. +1.27%), China comp. sales -14% (exp. -9.25%) (Newsquawk). Sees FY22 GAAP EPS down 4-6%, but sees FY23 EPS returning to double-digit growth; Q2 non-GAAP EPS and margins to be lower than prior year levels, but Q3 margin to show a significant improvement (Newsquawk).


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  H&R Block (HRB) - Q2 2022 EPS -1.02 (exp. -1.24), revenue USD 159mln (exp. 159mln). Reiterates FY22 outlook. (HRB)


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  Playtech (PYTCY) - FY21 results expected to exceed prior expectations. Aristocrat said offer to acquire Playtech was expected to lapse, votes cast in favour were short of the 75% threshold required. Playtech to hold a meeting on the deal, actively considering options and evaluating alternative proposals. (Boomberg)

CONSUMER STAPLES:

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  The Hershey Company (HSY) - Transitioning from two reportable segments ("North America" and "International and Other") to three reportable segments ("North America Confectionery", "North America Salty Snacks", "International"). (Hershey)

AUTOMAKERS:

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  General Motors Co (GM) - Gained in after hours after decent Q4 earnings despite chip shortages. Q4 Adj. EPS 1.35 (exp. 1.19), Revenue 33.6bln (exp. 34.01bln). FY22 EPS seen between 6.25-7.25 (exp. 6.87). Expects to double revenue to USD 275-315bln by 2030. Said that with an improving outlook for semis in US and China, expects 2022 results will remain strong. Strong demand was driving acceleration of EV manufacturing (Newsquawk). CEO said plans to invest in a third EV truck plant, will not reinstate dividends at this time; CFO expects 10% North American margins this year, chip shortage will start to diminish in H2 (Newsquawk).


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  General Motors (GM) - Self-driving car unit 'Cruise' announced it was opening up our driverless cars in San Francisco to the public. (Cruise)


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  Tesla (TSLA) - Being sued by a black and gay worker for unchecked racism at a plant. (Bloomberg)

FINANCIALS:

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  Chubb Ltd (CB) - Slipped in after hours trade despite earnings topping estimates in Q4, while profit more than doubled. Core operating EPS 3.81 (exp. 3.29), Revenue 9.32bln (exp. 8.51bln), net premiums written +8.8% Y/Y at 9.15bln (exp. 9.18bln), net premiums earned +11% Y/Y at 9.32bln (exp. 9.23bln). (Newsquawk)


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  Credit Suisse (CS) - US judge refused to dismiss class-action suit from investors which accuses CS of conspiring to rig prices in the FX market. (Reuters)


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  Generali (ARZGY), Credit Agricole (CRARY) - Generali to acquire Credit Agricole's health insurance unit for EUR 435mln. (MarketWatch)


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  Julius Baer (JBAXY) - FY net profit +55% at CHF 1.08bln; adj. net profit 1.14bln (exp. 1.14bln), AUM 482bln, +11%. CET1 16.4% (prev. 14.9%). Dividend payout ratio increase to around 50% of adj. net profit, propose a dividend of 2.60/shr (exp. 2.07/shr). (Reuters)


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  Santander (SAN) - Reports most profitable quarter in over a decade, boosted by pandemic recovery. Q4 revenue EUR 11.8bln (exp. 11.56bln), net 2.28bln (exp. 2.09bln), CET1 12.1% (exp. 12.1%), NII 8.72bln (prev. 8.46bln). (FT)

CRYPTO:

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  MicroStrategy (MSTR) - Q4 EPS -8.43 (exp. +1.49), digital asset impairment charge USD 146.6mln was reflected in Q4 earnings; Q4 revenue USD 134.5mln (exp. 133mln). Said software business returned to positive revenue growth for the first time since 2014; significantly expanded bitcoin (BTC) holdings in the quarter, adding over BTC 10,300 to holdings after raising capital in the quarter; MicroStrategy now the world's largest publicly traded corporate owner of bitcoin, with over 125,000. Said it will continue to evaluate opportunities to raise additional capital to execute on its bitcoin acquisition strategy. (MSTR)

HEALTH CARE:

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  Novartis (NVS) - Forecasts 2022 sales and profit growth; Sandoz review continues. Q4 revenue 13.23bln (exp. 13.35bln), Core EPS 1.40 (prev. 1.34). Is benefitting from the Roche (ROG SW) divestment gain of 14.6bln. Sandoz net sales +2% at 2.5bln. Sees FY22 Innovative Medicines sales expected growing mid-single digits; Sandoz sales expected to be broadly in line Y/Y. Proposes dividend of CHF 3.10/shr (prev. 3.00/shr). Propose holders authorise additional share repurchase of CHF 10bln between the 2022-2025 AGMs. (Novartis)


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  Novartis (NVS), Blackstone (BX), Carlyle (CG) - Blackstone, Carlyle, EQT among those interested in bidding for Novartis' Sandoz generics unit; could fetch USD 25bln. (FT)


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  Gilead Sciences Inc (GILD) - Lower by nearly 4% in after hours as earnings weighed by patent settlement with Viiv Healthcare; GILD to pay USD 1.25bln in Q1 + 3% royalty on future sales of Biktarvy. Q4 Adj. EPS 0.69 (exp. 1.59), Revenue 7.20bln (exp. 6.66bln); raised dividend by 2.8% to 0.73/shr. (Newsquawk)


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  GlaxoSmihKline (GSK), Pfizer (PFE) - Viiv Healthcare (HIV JV between Glaxo and Pfizer) and Gilead (GILD) resolve litigation over Biktarvy and VIIV's Dolutegravir patents; GILD to make up front payment of USD 1.25bln to VIIV in Q1 22, and a 3% royalty on future US sales of Biktarvy. (Reuters)


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  Pfizer (PFE), BioNTech (BNTX) - Initiates rolling submission for EUA of COVID-19 vaccine in children 6 months through 4 years of age following request from US FDA. (Pfizer)


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  Pfizer (PFE), Roche (ROG SW) - Roche Head of Pharma Research & Early Development leaving to join Pfizer. (Pfizer)


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  Becton, Dickinson and Company (BDX) - Approves embecta spinoff, declares distribution of embecta stock. (BD)


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  Regeneron (REGN), Sanofi (SNY) - Positive Dupixent data across five diseases with underlying type 2 inflammation to be presented at 2022 AAAAI Annual Meeting. (Regeneron)


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  Novo Nordisk (NVO) - Q4 revenue DKK 38.3bln (exp. 37.9bln), FY revenue 140.8bln (exp. 140.1bln); North American sales +10%, International +12%. Initiate USD 22bln buyback programme. (Novo Nordisk)


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  Siemens Healthcare Diagnostics (SIEGY) - Awarded USD 225.5mln US Army contract for COVID-19 tests. (DoD)

MATERIALS:

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  Glencore (GLNCY) - FY21 Production Report: Copper 1.195k/T (prev. 1.258k/T), Cobalt 31k/T (prev. 27.4k/T), Gold 809k/oz (prev. 916k/oz), Silver 31.52k/oz (prev. 32.77k/oz), Coal 103.3mln/T (prev. 106.2mln/T). FY22 production guidance is unchanged from the December update. (Glencore)


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  Anglo American (NGLOY) - De Beers Cycle-1 rough diamond sales USD 660mln; saw continuation of robust rough diamond demand. (MarketWatch)

INDUSTRIALS:

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  Aerojet Rocketdyne (AJRD) - Investigating executive chairman Warren Lichtenstein, accused him of launching a proxy fight in an effort to maintain his board position. (Bloomberg)


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  L3Harris Technologies (LHX) - Awarded a USD 117mln contract modification (P00078) to previous contract for Period Three system sustainment services. (DoD)


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  Raytheon (RTX) - Awarded a USD 105mln contract for technical collections and communications field service representatives services in support of US Special Operations Command Special Reconnaissance. (DoD)

REAL ESTATE:

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  Equity Residential (EQR) - Q4 FFO/shr 0.82 (exp. 0.80); sees Q1 FFO/shr mid-point 0.78 (exp. 0.78), and FY22 mid-point at 3.45 (exp. 3.35). (EQR)

02 Feb 2022 - 09:51- EquitiesData- Source: Newsquawk