US EARLY MORNING: US equities futures dragged lower by Russia tensions; but some think impact could be limited due restrained nature of sanctions response

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  EQUITIES: US index futures are lower by 1.0-2.0%, pressured by rising tensions between Ukraine/Russia, where the latter recognised separatist regions in Donbas, resulting in Western powers threatening further sanctions. It is clearly a headline-driven market at the moment, and traders are assessing what the impact could be on individual equities as well as the ramifications for broader monetary policy. Reuters reports that investors are, at this stage, pricing a limited Russian intervention to the two separatist regions; Berenberg said that if Russia stopped there, it would weaken the Russian economy over time, but with very limited impact on the advanced world, as Western sanctions against Russia would be limited; however, a full-invasion would be another matter. In terms of how much geopolitical risk is already priced into global assets, an analysis by Goldman Sachs on Monday – before Putin’s address ­– said that there is an implied discount of around 5% on the S&P 500, 8% on Europe’s Eurostoxx index, 25bps in US 10yr yields, and close to 2% on the EUR/USD currency, with even larger discounts in other European satellite currencies; GS estimates that gold is trading at around a 5% premium based on the geopolitical risks that have been priced year-to-date.


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  TREASURIES: While Treasuries re-opened with a bid amid heightened geopolitical tensions, downside has been paring back: US 10yr yields narrowed to as much as 1.846%, but are now trading back above 1.90%. Yields are at wides for the session thus far – shorter dated yields are up by 1.5-2.0bps, likely as Fed Governor Bowman Monday left open the potential for a 50bps rate move at the March FOMC; yields along the curve from 5s through 30s are lower by 0-3bps, leaving the curve with a bull-flattening bias. There has also been some re-pricing of central bank expectations based on the latest geopolitical tensions, with traders pushing back bets of tighter policy: the Fed is now seen as more likely to go for a 25bps rate hike increment at the March meeting, and the market has pared back pricing for the amount of rate tightening priced in this year (money markets see rates at 1.5-1.75% by the end of this year); in Europe, the first ECB rate hike is now seen coming in December 2022 vs October previously.


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  FOREX: The FX landscape is showing more resilience to the geopolitical fallout: the Dollar Index finds itself a touch beneath neutral at pixel time, though still above the 96.00 handle, while high beta FX in G10 are flat/higher vs the dollar, lead by the AUD and SEK, although GBP and CAD are around flat. The dollar downside may be a result of diminishing prospects of a 50bps rate hike at the January FOMC, although this possibility was still left on the table by Fed Governor Bowman on Monday (albeit caveated around incoming data); additionally, some FX analysts have been framing the fallout as ‘regional’ for now, implying limited global follow-through. EMFX is defensive, however, with the risk-proxies ZAR and TRY lower by 0.3% and 0.5% respectively. As we approach month-end, Citi’s rebalancing model points to USD buying, with the signal in line with historical norms; the USD buy signal is strong vs the JPY, and the signal to sell EUR is weaker due to the poor performance of Euro Area fixed income assets.


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  CRUDE: Brent and WTI futures have added around USD 3 and USD 4 per barrel respectively, with gains underpinned by geopolitical tensions. ING's strategists note that the West has responded by saying that it will impose sanctions on the separatist regions in Donbas, "however, given that these will target separatists rather than Russia, it should have no impact on energy flows," ING says, and ahead the bank says Russian developments will be key for determining price direction in the near term, as has been the case for several weeks.

EQUITY NEWS:

TECH:

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  Amazon (AMZN), Apple (AAPL), Alphabet (GOOGL), Meta Platforms (FB), Microsoft (MSFT) - Individual users should be allowed to sue US tech giants for breaching EU rules aimed at curbing their power, according to privacy and consumer groups; calls come as EU finalises points of its Digital Markets Act, which in effect targeting Apple, Alphabet, Facebook, Amazon, Microsoft. (Reuters)


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  Fresenius (FSNUY) - Q4 Revenue EUR 9.97bln (exp. 9.84bln), EBIT 1.17bln (exp. 1.09bln), Net Income 521mln (exp. 472mln). Expects further earnings growth in 2022, despite ongoing COVID effects and cost inflation impact. (Newsquawk)

FINANCIALS:

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  Aon (AON) - Authorises additional USD 7.5bln in share repurchases, lifts dividend by 10%. (MarketWatch)


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  Barclays (BCS) - Preparing to name Anna Cross as CFO in coming months, according to sources. (Sky)


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  Berkshire Hathaway (BRK) - Ahead of Warren Buffett’s annual shareholder letter, due February 26th, Barron's says it may be time for some changes at the company. (Barron's)


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  Brookfield Asset Management (BAM) - Seeks to raise USD 25bln for its largest ever flagship infrastructure fund; has already begun marketing the fund, which may exceed the target. (Bloomberg)


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  Credit Suisse (CS), SoftBank (SFTBY) - SoftBank said Credit Suisse subpoena was a 'fishing expedition', and a 'collateral consequence' as firms are sparring over who is to blame for the Greensill collapse. (Bloomberg)


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  HSBC (HSBC) - FY21 adj. Revenue USD 50.09bln (exp. 50.11bln). adj. Pretax 21.92bln (exp. 22.03bln). CET1 ratio 15.8% (exp. 15.5%). Co. plans a USD 1bln share buyback programme. Proposes a dividend of 0.18/shr. (Newsquawk)

ENERGY:

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  Exxon Mobil (XOM) - Union workers locked out of their jobs at a Texas oil refinery for nearly 10 months voted on Monday to accept an Exxon's contract offer, ceding to a key company demand that it have the right to determine plant assignments. (Reuters)


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  Marathon Petroleum (MPC) - A fire at Marathon's 578k BPD crude oil refinery in Garyville, Louisiana, was extinguished on Monday afternoon. (Reuters)

INDUSTRIALS:

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  Boeing (BA) - Awarded USD 103.8mln Army contract modification. (DoD)


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  Tesla (TSLA) - Tesla faces scrutiny by German regulator over autopilot feature. (Bild)


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  Volkswagen (VWAGY), Porsche (POAHY) - Volkswagen in advanced talks with Porsche over a possible IPO of the latter; final decision not yet made. Could be valued at USD 96bln. (Bloomberg)

MATERIALS:

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  Antofagasta (ANFGY) - FY21 Revenue USD 7.47bln (exp. 7.44bln), adj. EBITDA 4.85bln (exp. 4.68bln) underlying EPS 1.42 (exp. 1.46), final dividend of 1.189/shr (exp. 0.9422/shr). FY22 CAPEX 1.7-1.9bln. FY22 production guidance: Copper 660-690k/T, Gold 170-190k/oz and Molybdenum 8.5-10k/T. (Newsquawk)


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  DuPont (DD) - Barron's is positive on DuPont; says stock is a buy as CEO works his magic. (Barron's)


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  Glencore (GLNCY) - Commenced a previously announced buyback of EUR 550mln shares. (Newsquawk)


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  Norsk Hydro (NHYDY) - Q4 Revenue NOK 46.4bln (exp. 42.0bln), underlying EBIT 7.0bln (exp. 7.5bln), underlying EBITDA 9.0bln (exp. 9.3bln). Higher all-in metal and alumina prices and improved upstream volume alongside record Hydro Energy results added to the adj. EBITDA figure. To propose an ordinary dividend of 3.40/shr for FY21 and an extraordinary one of 2.0/shr. (Newsquawk)


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  Thyssenkrupp (TKAMY) - IPO of hydrogen unit facing headwinds, valuation hit amid a steep decline in hydrogen shares. (Reuters).

CYCLICAL:

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  Ethan Allen (ETD), La-Z-Boy (LZB), RH (RH) - Barron's is positive on Ethan Allen; notes it trades 8.1x expected forward earnings, below competitors La-Z-Boy (8.6X) and Restoration Hardware (15.9x). (Barron's)


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  IHG (IHG) - FY21 USD 2.9bln (prev. 2.39bln), Operating Profit 534mln (exp. 341mln). Significant improvement in trading during the year, RevPAR recovering to 70% of 2019 levels. FY21 final dividend of 0.859/shr, equivalent to the withdrawn FY19 final payment. (Newsquawk)


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  McDonalds (MCS) - Activist Icahn nominates two to McDonald’s board; proxy fight comes as it pushes MCD to require suppliers to change treatment of pigs. McDonalds is reviewing Icahn's nominees. (WSJ)


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  Pirelli (PRLLY) - Signed a 5yr multi-currency bank line worth EUR 1.6bln. (Newsquawk)

STAPLES:

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  Kellogg (K) - Announces supply chain leadership change. (K)


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  Kraft Heinz (KHC) - CEO Patricio to become Chair; James Park, of Fitbit at Google, nominated as new board member. (KHC)

COMMUNICATIONS:

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  Nokia (NOK) - Barron's is positive on Nokia, says it is remaking itself into a 5G leader, and now might be the time to add the stock. (Barron's)


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  Telecom Italia (TIIAY) - Expected to respond around mid-March to KKR's bid. (Il Sole)

HEALTH CARE:

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  Fresenius Medical Care (FSNUY) - Q4 Revenue EUR 4.65bln (exp. 4.60bln), Operating Income 449mln (exp. 435mln), Net Income 229mln (exp. 252mln), EPS 0.78/shr (exp. 0.87/shr). Confirms mid-term targets; business development was significantly impacted by COVID in 2021, expect this to continue into 2022. Proposes a 1.35/shr dividend (exp. 1.19/shr). (Newsquawk)


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  Siemens Healthineers AG (SMMNY) - Awarded USD 370.4mln Army contract modification. (DoD)


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  Smith & Nephew (SSN) - FY21 Revenue USD 5.212bln (exp. 5.220bln). FY dividend 0.375/shr (exp. 0.341/shr). Operating profit 539mln (prev. 295mln). (Newsquawk)

UTILITIES:

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  EDF (ECIFY) - Expects to continue operating its business as per normal in Russia, which accounts for a small portion of business. Moody's downgraded to Baa1; outlook negative. (Newsquawk)

22 Feb 2022 - 10:00- EquitiesGeopolitical- Source: Newsquawk