US EARLY MORNING: Stocks lower as geopolitical tensions linger; Biden to speak with leader today ahead of Europe visit later in the week; Fed Chair Powell to deliver remarks to NABE

EQUITIES: Apac equities were choppy at the start of the week, while European indices were mixed after the open. US index futures are lower by 0.2-0.5%, but off lows (ES -0.2%, RTY -0.3%, YM – 0.3%, NQ -0.5%). Geopolitics and higher oil prices are once again causing angst; on the former, there is not very much progress being made. Reports suggest that Russia has severed Ukraine’s access to the Sea of Azov over the weekend, with the region of Mariupol–a strategic area between Russian-annexed Crimea and Donetsk–on the brink of being lost to Russia. President Putin is apparently not yet ready to meet with Ukraine President Zelenskiy, with the latter warning that a failed peace process could lead to WW3. President Biden will today hold a call with leaders from the UK, France, Germany, Italy to further discuss Russia today ahead of his visit to the continent later in the week. Oil prices have risen by USD 4.60-4.80/bbl as Europe mulls an oil embargo, while Saudi Aramco CEO noted tightness in markets. Meanwhile, amid increasing risks of an economic slowdown and higher consumer prices are leading to stagflation fears; Bill Gross was the latest high profile commentator on the weekend to warn that tighter Fed policy would 'crack' the US economy. For equity investors, Goldman Sachs notes that stagflation risks present the prospect of lower real returns and higher risks from 60/40 equity/bond portfolios. Its strategists have noted that "while there is pressure for higher equity allocations, given the prospect of poor returns and less diversification from bonds, this increases the risk of large and fast drawdowns in the near term." The bank presents its clients with strategies to help achieve acceptable real returns without unacceptable risk: "a combination of allocations to commodities, real estate, infrastructure, more international diversification as well as value, high dividend yield stocks and convertibles could help to reduce the risk of another 60/40 'lost decade'." Full Day Ahead here. 

TREASURIES: Yields are higher by 3-6bps across the curve, with underperformance in the belly; major curve spreads are flattening by 1-3bps. As has been noted heavily recently, some Treasury curve spreads are inverting, which has historically been a harbinger of slower growth and recessions. Morgan Stanley writes that "with the Fed raising rates this past week and communicating a very hawkish tightening path over the next year, our rates strategists are looking for an inversion of the yield curve in 2Q," but add that "curve inversion does not guarantee a recession, and our economists don’t expect one," But it still supports its view for sharply decelerating earnings growth, and is further evidence that we are in a late cycle stage. Today (and again later in the week), Fed Chair Powell is scheduled to deliver remarks, where he will likely copy/paste the commentary he provided after last Wednesday’s FOMC, where he was keen to emphasise that the US economy can tolerate tighter monetary policy at this stage, and although the Fed marked-down its assessment of growth in 2022, it still sees above trend rate growth this year. Full Day Ahead here. 

EQUITY NEWS:

ENERGY:

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  Saudi Aramco - Pledged to hike investments by around 50% this year as it reported a doubling in 2021 profits. Asked if Aramco would pump more oil to fill any gaps in the market left by the war in Ukraine, CEO said it would produce according to guidelines from the Saudi energy ministry. CEO said oil markets were tight. (Reuters)


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  Chevron (CVX) - Union workers removed from California refinery ahead of a deadline to begin the first strike at the producing plant in more than 40 years. (Reuters)


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  Energy - Houthis fired missiles and drones at Saudi energy and water desalination facilities, causing a temporary drop in output at a refinery but no casualties. (Reuters)


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  Energy - Germany and Qatar are negotiating long-term energy partnership, as Europe looks to minimise dependence on Russian energy. (Reuters)


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  Energy - UK plans to hold the first North Sea oil and gas licensing round since 2020 this year. (FT)


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  Haliburton (HAL) - Suspended business in Russia. (HAL)


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  Baker Hughes (BKR) - Suspended new investments for its Russia operations. (BKR)


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  Schlumberger (SLB) - Suspended business in Russia. (SLB)


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  Rockcliff Energy - Speaking with advisers, evaluates takeover interest from rival US shale drillers; could seek USD 4bln+. (Bloomberg)


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  Weatherford (WFRD) - Placed a hold on shipments and immediately suspended making any new investments or deploying new technology in Russia. (WFRD)


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  Eni (E) - Eni and Sonatrach announced an oil and gas discovery associated with the Zemlet el Arbi concession. (Corriere)


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  Nuclear - UK PM to Monday outline a "gung ho" approach to increasing UK nuclear power. (FT)

INDUSTRIALS:

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  Boeing (BA) - China Eastern Airlines jet flying from Kunming to Guangzhou on Monday experienced an accident in Guangxi; craft was a Boeing 737. Injuries/deaths from the accident unknown at this stage. (Newsquawk)


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  EVs, Tesla (TSLA) - The world’s largest maker of batteries for electric vehicles is considering sites across North America for a USD 5bln plant to supply customers including Tesla. (Blomberg)


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  Tesla (TSLA) - Paris taxi driver files suit against Tesla after fatal crash in December 2021, where the driver crashed into pedestrians, leaving one dead and injuring dozens. (Sky)


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  Porsche (POAHY), Apple (AAPL) - Reportedly held early discussions about potential joint projects last year; CEO revealed little by way of detail. (WSJ)


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  Volkswagen (VWAGY) - China unit plans JVs for battery raw materials (Newsquawk). Separately, is recalling more than 246k SUVs in North America due to faulty wiring harnesses (ABC).


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  Renault (RNLSY) - Resumed production at its Moscow plant. (Newsquawk)

MATERIALS:

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  Canadian Pacific (CP) - Halts operations on Sunday after talks with union fail; union's leadership unable to negotiate a settlement or agree to binding arbitration. (Bloomberg)


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  Antofagasta (ANFGY) - Mulling exit of its Pakistani copper and mining project; could raise USD 900mln from stake sale. (Times)


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  Barrick Gold (GOLD) - Ends long-running dispute with Pakistan, will now develop one of the world's biggest gold and copper mining projects in Pakistan. (Reuters)


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  Salzgitter (SZGPY) - Final FY21 revenue EUR 9.77bln (exp. 9.67bln). Pretax 705.7mln (prelim. 706.7mln). Affirms FY22 Pretax profit but sees Revenue just below EUR 11bln (prev. EUR 11bln). (Newsquawk)

CONSUMER STAPLES:

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  Food inflation - Russia’s invasion of Ukraine threatens a significant portion of the world’s food supply when prices were already at their highest level in years. (WSJ)


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  Food inflation - Barron's cites stocks that are a buy to combat rising food costs, including: Agco (AGCO), Albertsons (ACI), Bloomin' Brands (BLMN), Brinker International (EAT), Bunge (BNGE), Conagra Brands (CAG), General Mills (GIS), Hershey (HSY), Hostess Brands (TWNK), Kellogg (K), Kroger (KR), McDonald ’s (MCD), Starbucks (SBUX). (Barron’s)

CONSUMER CYCLICAL:

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  Amazon (AMZN) - DC suit accusing Amazon of controlling prices was thrown out; the records did not state the reason for the dismissal. AG considering other legal options. (NYT)


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  Kohl's (KSS) - Positive mention in Barron's amid takeover interest. (Barron's)


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  Wendy's (WEN) - Positive mention in Barron's; says the stock is a buy. (Barron's)

HEALTH CARE:

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  Walgreens Boots Alliance (WBA) - Management talking with potential suitors for Boots; as it pushes ahead with a planned GBP 7bln sale despite volatile market conditions. (Times)


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  COVID - NIH's Fauci said it was unlikely that the US would see surge from new COVID-19 variant. (The Hill)

FINANCIALS:

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  Coinbase Global (COIN) - Jim Chanos reveals new short position in crypto exchange Coinbase. (CNBC)


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  Blackstone (BX) - Targets fund for individual millionaires, giving them access to markets unavailable publicly. (Bloomberg)


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  Banks - The largest US investment banks have taken a USD 4.6bln revenue hit from the freeze in equity raisings because of recent market volatility. (FT)


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  London Stock Exchange (LNSTY) - Strikes USD 1bln deal to sell wealth asset to a consortium of Clearlake Capital and Motive Partners. (Sky)


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  Deutsche Bank (DB) - CEO reportedly urged German government to hold-off on further Russian sanctions for now. (Newsquawk)


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  UniCredit (UNCRY) - Facing difficulties with long-planned sale of its 10% stake in ABH Holding (the owner of a Russian bank Alfa-Bank) amid the war. (Bloomberg)


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  Julius Baer (JBAXY) - Final FY21 Operating income CHF 3.857bln (prev. 3.583bln). Adj. pretax margin 28.2% (prev. 27.2%). Adj. profit before tax CHF 1.328bln (prev. 1.114bln). Notes the collateral value of Russian assets was unwound to zero in February. (Newsquawk)


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  CVC Capital Partners - Europe’s biggest private equity group is planning to shun London and IPO in Amsterdam; sets EUR 25bln target for its next private equity fund. (FT)

COMMUNICATIONS:

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  Disney (DIS) - Subject to two negative reports over the weekend focussing on its CEO Chapek. (CNBC, WSJ)


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  Disney (DIS) - Shanghai Disney Resort will temporarily close after new COVID outbreak in China. (CNBC)


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  Twitter (TWTR) - Positive mention in Barron's; says valuations are cheap, while it is showing new progress toward its revenue and user goals. (Barron's)


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  Chinese names - Foreign investors dumped a record USD 6bln of Chinese shares in the first three months of 2022 as they take fright at new coronavirus outbreaks and the risk that western countries will sanction Beijing if it supports Russia’s war in Ukraine. (FT)


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  Telecom Italia (TIIAY), KKR (KKR) - KKR execs divided on how to proceed with offer for TIT. (Newsquawk)

TECH:

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  Palo Alto Networks (PANW) - Positive mention in Barron's; says cyberattack threats are increasing, and PANW will benefit. (Barron's)


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  ASML (ASML), Intel (INTC) - ASML CEO said chipmakers would face two years of equipment shortages; Intel has sent its experts to help ASML accelerate production. (FT)


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  Big tech - Australia will force internet companies to share data about how they have handled misinformation and disinformation under new laws, bolstering efforts to rein in Big Tech. (Reuters)


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  Microsoft (MSFT) - Bing search engine required to suspend its auto-suggest function in China amid an ongoing crackdown on tech platforms from Beijing. (Reuters)


• 
  Anaplan (PLAN) - After an activist campaign, has agreed USD 10.7bln sale to private equity firm Thoma Bravo. (FT)

21 Mar 2022 - 09:26- EquitiesGeopolitical- Source: Newsquawk