Newsquawk

US EARLY MORNING: US equity futures are a little higher. This week, FOMC is the main event, PCE at the end of the week, and some key corporate earnings

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EQUITIES: Asia equities finished lower, while Europe started defensively. US equity futures are, however, shrugging-off these leads, trading higher by around 0.4%, with the Nasdaq-100 leading gains (just) after its recent battering. Desks have been citing Ukraine-related geopolitics as a reason for the caution, while a note from Goldman Sachs previewing this week’s Fed meeting is also garnering much attention, with the central bank warning that it is possible that the Fed could raise rates at every meeting this year.

BONDS: That GS note was said to be behind the higher US Treasury yields overnight; currently yields are mixed, still higher by around 2bps along the short-end of the curve, although the tenors 5s through 30s have tilted into positive territory amid the cautious European open. The US will today sell 2s, so there may be some auction dynamics also in play along the short end.

DOLLAR: The Dollar Index is a little above neutral, and that seems to be enough to inject downside in the G10 activity currencies, with AUD particularly suffering after soft PMI data. EMFX is mixed.

CRUDE: Crude benchmarks are trading higher by around 20c; commentary on the Iran nuclear talks has soured of late, which therefore diminishes some of the threat of Iranian barrels coming onto international markets anytime soon; the US/Russia tensions over Ukraine were said to be adding some support too, while the questions over the spare capacity of OPEC+ also continues to be reported on. From the US perspective, this week’s main event is the FOMC meeting on Wednesday, as well as PCE inflation data at the end of the week. The earnings docket will also pick-up this week, with the likes of Microsoft (MSFT) and Apple (AAPL) due to report numbers, while the Big Blue IBM (IBM) will publish its figures after today’s close.

DAY AHEAD 24/JAN:

08:15GMT/03:15EST: France Markit Composite, Manufacturing, Services PMIs (JAN, Flash)

08:30GMT/03:30EST: Germany Markit Composite, Manufacturing, Services PMIs (JAN, Flash)

09:00GMT/04:00EST: EZ Markit Composite, Manufacturing, Services PMIs (JAN, Flash)

09:30GMT/04:30EST: UK Markit Composite, Manufacturing, Services PMIs (JAN, Flash)

11:00GMT/06:00EST: Bundesbank Monthly Report

12:00GMT/07:00EST: Mexico Mid-month Inflation (JAN)

13:30GMT/08:30EST: Canada Manufacturing Sales (DEC)

13:30GMT/08:30EST: US Chicago Fed (DEC)

14:45GMT/09:45EST: US Markit Composite, Manufacturing, Services PMIs (JAN, Flash)

16:30GMT/11:30EST: US 3-Month, 6-Month Bill Auctions

18:00GMT/13:00EST: US 2-Year Note Auction

21:10GMT/16:10EST: IBM (IBM) Earnings (preview)

COVID:

WHO said the end of the pandemic in Europe is plausible after Omicron.

NIH’s Fauci said that the US Omicron outbreak was going in the right direction. FDA took action to expand use of treatment for patients with mild-to-moderate COVID-19 including expanding the use of Remdesivir to some non-hospitalised adults and paediatric patients.

Israel said a fourth dose of the COVID-19 vaccine for over-60s made them twice as resistant to infection and three times more resistant to serious illness compared with those in the same age group that are thrice-vaccinated.

Japan government is to place 16 additional areas under COVID-19 quasi-state of emergencies.

ECONOMY:

UK PMIs: UK flash PMI data for January saw manufacturing 56.9 (exp. 57.9, Prev. 57.9), services 53.3 (exp. 54.8, prev. 53.6), leaving the composite at 53.4 (exp. 55.0, prev. 53.6). Markit said many business and financial services companies have meanwhile been far less affected by Omicron, and saw business growth accelerate at the start of the year, adding that business confidence in the outlook also picked up, driving sustained solid jobs growth. With inflationary pressures remaining elevated at near-record levels, this all adds to the likelihood of the Bank of England hiking interest rates again at its upcoming meeting.

EUROPE PMIs: Eurozone flash PMI data for January saw manufacturing 59.0 (exp. 57.5, prev. 58.0), services 51.2 (exp. 52.2, prev. 53.1), leaving the composite at 52.4 (exp. 52.6, prev. 53.3). Markit said that the Omicron wave had led to yet another steep drop in spending on many consumer-facing services at the start of the year, with tourism, travel and recreation especially hard hit. However, so far the overall impact on the wider economy appears relatively muted, and most encouraging is the further easing of manufacturing supply chain delays despite the renewed virus wave. Still prices for goods and services were rising at a joint-record rate as increasing wages and energy costs offset the easing in producers’ raw material prices, dashing hopes of any imminent cooling of inflationary pressures. German flash PMI data for January saw manufacturing 60.5 (exp. 57.0, prev. 57.4), services 52.2 (exp. 48.0, prev. 48.7), leaving the composite at 54.3 (exp. 49.2, prev. 49.9). Markit said the numbers came in comfortably above consensus to show a surprisingly resilient performance from the German economy at the start of the year, buoyed in particular by strong factory output growth, but still, rising costs remain a concern for businesses, with the survey data showing that input prices are continuing to rise sharply and on multiple fronts. French flash PMI data for January saw manufacturing 55.5 (exp. 55.5, prev. 55.6), services 53.1 (exp. 55.3, prev. 57.0), leaving the composite at 52.7 (exp. 54.5, prev. 55.8). Markit said inflationary pressures intensified across France, with output prices increasing at the fastest rate on record amid a stronger rise in cost burdens.

PBOC: China's central bank injected CNY 150bln via 14-day reverse repos with the rate lowered by 10bps to 2.25% for a net CNY 50bln injection and stated it will keep liquidity stable before the spring festival.

ECB: ECB's Holzmann said there is a great deal of uncertainty regarding how long inflation will remain above the central bank's target of around 2%. ECB’s Rehn said inflation drivers will subside over the course of the year and expects euro zone inflation of around 2% in the next two years, while he added a rate hike in 2023 is logical in the case of no new disruptions.

GEOPOLITICS:

ITALY ELECTION: Former Italian PM Berlusconi dropped his long-shot bid for the Italian presidency over the weekend. The first round of voting starts today; see our full updated preview here.

US/RUSSIA: Secretary of State Blinken warned of a significant US response if Russia entered Ukraine, added US had a range of options. State Department has reduced staff at the US embassy in Ukraine, and has ordered some family members to leave; also advised Americans not to travel to Russia due to the ongoing geopolitical tensions.

US/IRAN: US Special Envoy for Iran said the US was unlikely to reach an agreement with Iran to save the 2015 nuclear deal unless Iran releases four US citizens 'held hostage'. An Iran spokesperson said it was ruling out any preconditions from the US in reviving the 2015 nuclear deal, including the release of prisoners; he blames the US' lack of readiness as the main reason for the slow pace of the nuclear talks. Iran says it is closer than ever to striking a nuclear deal.

US/CHINA: Taiwan reported 39 Chinese warplanes entered its air defence identification zone which was the largest incursion since October. Separately, US President Biden and Japan PM Kishida agreed Friday to enhance cooperation on pressing economic and security issues, including on China, North Korea and Russia. China's Foreign Ministry, said it made stern representations with both sides in response.

EQUITY NEWS:

TECH:

Apple (AAPL) - To unveil small product updates at a March/April event (BBG). Apple TV+ signs multi-year live-action film deal with Skydance Media to produce original content (Apple Insider). Apple-supplier Hon Hai (HNHPF) expects an 'unprecedented' Q1 (BBG).

COMMUNICATIONS:

Netflix (NFLX) - Positive mention in Barron's, argues stock looks de-risked after 40% slide since mid-Nov (Barron's).

TikTok - Agencies increasing ad spending, signalling shift as brands embrace TikTok, poses threats to Meta Platforms (FB) and Snap Inc (SNAP) (The Information).

ViacomCBS (VIAC) - Paramount Pictures delaying the release of the next two Mission Impossible films (Variety).

Vodafone (VOD) - In talks with Iliad (ILIAY) to combine Italian units (Rtrs). Vodafone approached rival Three UK in Dec over potential takeover (Times).

Orange (ORAN) - Boulben withdraws candidacy CEO, Heydemann now the primary contender (Rtrs).

Informa (IFJPY) - Preparing to launch an auction process to sell Citeline, its clinical trial data provider; could fetch GBP 1.2bln (Rtrs).

CONSUMER STAPLES:

Unilever (UL) - Activist Trian builds stake (WSJ). Some 'angry' investors warning UL against trying any further big acquisitions after failed GSK consumer unit bid (Times). Faces uphill battle to sell Ben & Jerry's as 'left-wing political activism' could pose problems for any prospective buyer (Telegraph).

Kraft Heinz (KHC) - Andre Maciel named EVP and CFO, effective March 2nd; will succeed Paulo Basilio (KHC).

CONSUMER CYCLICAL:

Kohl’s (KSS) - Acacia Research (ACTG) makes USD 64/shr offer; offer backed by Starboard (WSJ). Sycamore Partners also interested (BBG). Hedge funds urge KSS to run a sales process (BBG).

Peleton (PTON) - Activist investor Blackwells Capital calls on PTON to fire CEO and explore a sale after recent stock slide (WSJ). Separately, Showtime’s use of its exercise bike, which caused a heart attack to a character on a fictional TV show, was not product placement Peleton said (CNN).

Wynn Resorts (WYNN) - May unload online sports-betting business at a steep discount (NY Post).

Wynn Resorts (WYNN), Las Vegas Sands (LVS) - Positive mention in Barron's after removal of Macau regulatory risk (Barron's).

Jewellers - Diamond demand remains strong, De Beers raised rough-diamond prices ~10% last week (BBG).

FINANCIALS:

MicroStrategy (MSTR) - SEC says cannot strip out BTC wild swings from unofficial accounting measures it touts to investors (BBG). BTIG analyst said announcement was inconsequential, market has largely dismissed the impairment figures, reiterated Buy rating with USD 950 PT.

Morgan Stanley (MS), Bank of America (BAC), Wells Fargo (WFC) - Barron's positive on the three, notes better expense management than peers (Barron’s).

Goldman Sachs (GS) - Barron's positive, notes cheaper valuations than rivals Morgan Stanley (MS) and JPMorgan (JPM) (Barron's).

Goldman Sachs (GS) - working with Chime Financial on IPO; could aim for USD 40bln valuation vs USD 25bln in August funding round (Rtrs).

Aviva (AVVIY) - Cevian increased stake to 6.0% from 5.0%; previously, Cevian said it wants Aviva to return GBP 5bln excess capital to shareholders and reduce costs further (Telegraph).

Commerzbank (CRZBY) - To make EUR 436mln mBank unit provision in its Q4 earnings; will still post FY profit (Commerzbank).

Bridgepoint Group (BPTB) - To sell Element Materials to Temasek for around USD 7bln (BBG).

Mr. Cooper Group (COOP) - Barron's positive mention, says the mortgage company profits from rising interest rates (Barron's).

AUTOMAKERS:

Tesla (TSLA), Panasonic (PCRFY) – Panasonic to start producing new Tesla batteries in 2023, will increase the range of EVs by 20% (Nikkei).

Renault (RNLSY), Nissan (NSANY), Mitsubishi (MTSUY) - Group to announce EV development investment of EUR 20bln over 5yrs on Thursday (Rtrs).

Volkswagen (VWAGY) - Reportedly fired senior employee after highlighting cyber risks at its payments arm, which is soon to be majority-owned by JPMorgan (JPM) (FT).

INDUSTRIALS:

Rolls-Royce (RYCEY) - Launched a factory location competition between regions in UK (FT). Separately, its electric plane wins title of world's fastest EV, flying at 345mph (Telegraph).

Lufthansa (DLAKY) - In talks to purchase a 40% stake in ITA Airways (Rtrs).

HEALTH CARE:

Phillips (PHG) - Q4 rev EUR 4.9bln (exp. EUR 4.9bln), net income was short (EUR 151mln vs exp. EUR 590mln). Comp sales -10% in Q4, expects to start 2022 with soft comps; expects recovery in H2. Maintained dividend (MarketWatch).

GlaxoSmithKline (GSK) - Increasing output at a second plant to help meet demand for sotrovimab (WSJ).

Gilead (GILD) - FDA approves Veklury (Remdesivir) for the treatment of non-hospitalised patients at high risk for COVID-19 (Gilead).

AbbVie (ABBV) - FDA approves Skyrizi to treat adults with active psoriatic arthritis (Healio).

Ipsen (IPSEY) - Canada approves Sohonos as the first approved treatment for fibrodysplasia ossificans progressive (Ipsen).

ENERGY:

BP (BP) - Union criticised proposals where staff at US refineries would be required to wait up to 120 days between the expiration of a contract and the possible start of a strike (Rtrs).