US EARLY MORNING: US equity futures are higher; Powell testimony eyed to see if Fed normalisation is delayed; ADP jobs data due ahead of Friday's NFP

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  US equity futures are trading with gains of 0.6-0.8%. The European day started on a note of caution, but has seen equity losses pare back, while yields are higher in key fixed income markets. Treasury yields are up by 1-7bps, with the bulk of underperformance in the short-end of the curve. The Dollar Index is gaining amid geopolitical tensions, activity currencies are mixed, and there is not a lot of green on the FX screen. Crude futures are higher by 5.50-6.00 bucks, underpinned by geopolitics Tnd data showing a surprised drawdown in US crude stocks in the week – official DoE data due later today. 


• While the geopolitical narrative remains tense (or latest update on where things stand can be accessed here), a recent repricing of hawkish central bank expectations may be supporting the macro complex. Still, analysts caution that the longer the crisis persists in Europe, the greater the chances that the West ramps-up sanctions measures which could become more disruptive to other global assets. Conditions still have a headline-driven feel, and there are a lot of moving parts today: Russian geopolitics, OPEC+ policy update due later today (our preview can be accessed here – expect a continued easing of supply curbs by 400k BPD/month); Iran nuclear talks continue, and some officials have been talking up the prospects of a deal announcement this week; today’s central bank slate is packed, with Fed Chair Powell due to testify to the House (preview below), with traders wondering if the latest geopolitical developments have delayed monetary policy normalisation, or whether the Fed remains in inflation fighting mode; the BoC is expected to lift rates by 25bps today (preview below), and there will be focus on any potential updates to its reinvestment policy. Other officials from the ECB, BoE and Fed are also on today’s docket. Additionally, the ADP jobs data will provide us with the customary preview at 13:15GMT/08:15EST ahead of Friday's official jobs data; consensus looks for ADP +388k (prev. -301k), and Friday's NFP is seen printing 400k vs prev 467k).

AHEAD:

POWELL TESTIMONY (15:00GMT/10:00EST): The key question is whether the FOMC is shifting towards a more gradual pace of monetary policy normalisation due to the geopolitical fallout relating to Russia. The data has continued to show inflation pressures, while politically President Biden told Americans on Monday that fighting inflation was his 'top priority'. Money markets have virtually priced out the prospects of a 50bps rate hike at the March 16th FOMC meeting, and now sees a 25bps rate rise as the most likely outcome. And even over the course of 2022, markets are now pricing a somewhat shallower rate trajectory, with around five hikes now seen before the end of this year vs seven that were seen a fortnight ago, before the Russian invasion of Ukraine; and looking a little ahead of that, pricing of the terminal rate has also eased, with money markets seeing rates peak out at between 1.50-1.75% (the most recent Fed forecasts projected 2.5%). Traders will also be watching out for any details on balance sheet reduction (and if these plans have also been rocked by geopolitical events). So far, markets only really know that the Fed's pace of balance sheet normalisation will be quicker than it was previously and that it will ultimately comprise mainly of Treasuries, but there is little other definitive information relating to the pace of the run-off, when the Fed will begin outright sales, and what the eventual size of the balance sheet will look like. In terms of a text release, this has on occasion been released early (was released at 13:30GMT/08:30EST in July 2021, but was released at 15:00GMT/10:00EST in February 2021). You’ll be able to watch the Powell testimony live here at 15:00GMT/10:00EST.

BOC RATE DECISION (15:00GMT/10:00EST): The consensus expects the Bank of Canada to lift rates by 25bps to 0.50%. RBC argues that the recent Russia/Ukraine fallout will be unlikely to dissuade the bank from hiking. "Though added disruptions to global supply chains would eventually filter into Canadian trade flows, and higher commodity prices could boost costs for energy and food products, Canada’s direct trade exposure to Russia and Ukraine is small," RBC writes, "the domestic economy is also too strong — and inflation pressures too firm — to justify the current emergency levels of interest rates." RBC reminds us that in January, the BoC was of the view that Omicron would be less severe than previous COVID waves, and that seems to be transpiring, although the labour market took a knock in January, RBC says spending levels appear to be surging back in February as pandemic restrictions ease. Another area of focus will be on the Bank’s bond reinvestment plans. Currently, it is continuing the reinvestment phase, keeping its overall holdings of Government of Canada bonds roughly constant. TD Securities expects the Bank will remain in its reinvestment phase for the balance sheet, and that will signal more rate hikes are to come. Citi says it would be hawkish for the BoC to announce the end of balance sheet reinvestments, and while it is not its base case, it warns that there could be some more communications around the details of how balance sheet runoff will work when it starts.

Full Newsquawk Day Ahead calendar can be accessed here. 

EQUITY NEWS:

INDICES:

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  S&P Global (SPGI) - S&P DJI will halt the implementation of certain types of events for stocks listed and/or domiciled in Russia (including ADR/GDRs). (S&P)


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  Stoxx to axe 61 Russian companies from its indices. (FT)


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  Evraz (EVRZF), Polymetal (AUCOY), easyJet (ESYJY), Endeavour Mining (EDV) - Evraz and Polymetal could be removed from the FTSE 100 in the next reshuffle, alterations will be confirmed after Wednesday’s close; while Endeavour Mining could be added and easyJet is no longer expected to be readmitted. (City AM)

TECH:

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  Nvidia (NVDA) - Hackers stole proprietary information when they breached the company’s networks and have been leaking the data online. Nvidia became aware of the compromise on February 23rd.Nvidia said it is working to analyse the situation, and does not anticipate any disruption to its business. (Bloomberg)


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  Salesforce.com (CRM) - Rose 3.75% in after hours trade following results. Q4 adj. EPS 0.84 (exp. 0.75), Q4 revenue USD 7.33bln (exp. 7.24bln). Sees Q1 adj. EPS 0.93-0.94 (exp. 0.99), and sees Q1 revenue between USD 7.37-7.38bln (exp. 7.26bln). CEO said it continues to see "tremendous" demand from customers, and it is raising its FY23 guidance: FY23 revenue view seen at between USD 32bln (exp. 31.8bln, prev. 31.7-31.8bln), and sees FY23 adj. EPS between 4.62-4.64 (exp. 4.74). (CRM)


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  Hewlett Packard Enterprise Company (HPE) - Rose 2.2% in after hours as profit beats the consensus and it raised guidance. Q1 adj. EPS 0.53 (exp. 0.46), Q1 revenue USD 6.96bln (exp. 7.03bln). Gross margin 3.9% (exp. 33.3%). Raised FY22 adj. EPS guidance to between 2.03-2.17 (exp. 2.19, prev. 1.96-2.10), reiterates FCF guidance of USD 19bln at midpoint. (HPE)


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  First Solar (FSLR) - Tumbled by over 10% in after hours on soft FY guidance. Q4 EPS 1.23 (exp. 1.06), Q4 revenue USD 907mln (exp. 918mln). Sees FY22 revenue between USD 2.4-2.6bln (exp. 2.76bln). (FSLR)

COMMUNICATIONS:

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  AMC Entertainment Holdings (AMC) - Flat in after hours trade after reporting earnings. Q4 adj. EPS -0.11 (exp. -0.26), Q4 revenue USD 1.17bln (exp. 1.1bln). Finished 2021 with record year-ending liquidity of more than USD 1.8bln. Management said it took advantage of the robust Q4 film slate, pent-up consumer demand, and a bold advertising campaign to attract some 60 million global visitors to its theatres in Q4 (seven-fold increase vs Q4 2020, and +50% Q/Q). Said it was quite bullish for FY22. Said FY22 results to be heavily weighted towards H2. (AMC)


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  Meta Platforms (FB) - Instagram announces auto-generated captions for Feed videos, making Instagram more accessible for deaf/hard-of-hearing people. (Instagram)


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  Ericsson (ERIC) - DOJ said the disclosure made prior to the Deferred Prosecution Agreement on its internal investigation into conduct in Iraq was insufficient. (Newsquawk)


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  Telecom Italia (TIIAY), KKR (KKR) - Will reportedly scrap its common stock dividend, expected to outline alternative to the EUR 10.8bln takeover offer from KKR. (Newsquawk)

CONSUMER CYCLICAL:

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  Nordstrom (JWN) - Surged by nearly 35% in after hours trade after profits topped expectations, it boosted its outlook, and see itself in a position to return cash to shareholders ahead. Q4 EPS 1.23 (exp. 1.02), Q4 revenue USD 4.38bln (exp. 4.35bln). Said it continued to navigate global supply chain disruptions throughout the quarter by accelerating receipts and investing in improved in-stock levels. Sees FY22 EPS between 3.15-3.50 ex-share buybacks (exp. 2.01). Expects to be in position to return cash to shareholders in Q1 2022. (JWN)


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  Ross Stores (ROST) - Gained 9% in after hours trading as profits beat, announced share buybacks, and lifted its dividend; guidance for Q1 and FY were light. Q4 EPS 1.04 (Exp. 0.97), Q4 revenue USD 5.0bln (exp. 4.96bln). Board authorised USD 1.9bln share repurchase programme over two years, replaces the USD 850mln under existing programme. Raised quarterly dividend +9% to 0.31/shr. Sees Q1 EPS between 0.93-0.99 (exp. 1.33), and sees Q1 SSS at -3% (midpoint). Sees FY22 EPS between 4.71-5.12 (exp. 5.22), and sees FY22 SSS +0-3%. (ROST)


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  Urban Outfitters (URBN) - Q4 EPS 0.41 (exp. 0.50), Q4 revenue USD 1.33 (in line); retail segment net sales +14% in Q4. Comp sales +49% at Free People Group, +14% at Anthropologie Group, +3% at Urban Outfitters - CEO said record fourth quarter sales were driven by positive comps at all brands, adding that strong customer response to our early spring offerings bode well for continued sales growth in Q1; Q1 SSS to rise 'mid-teens'. On price pressures, CEO noted consumer resilience amid the headwinds of surging inflation, the remnants of COVID-related restrictions and a stock market correction. "These opticals have pushed consumer sentiment to decade lows, but we see continued strength in our customer spending happens." (URBN)


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  WW International (WW) - Gained 4.4% in after hours trading. Q4 EPS 0.42 (exp. 0.36), Q4 revenue USD 275.8mln (exp. 279.3mln). Sees Q1 loss per share of 26-31c (exp. -0.12), and sees Q1 revenue at USD 300mln (exp. 279.3mln). CEO said launch of PersonalPoints in November lifted member recruitment compared to trailing trends, challenging category demand in Q4 pressured signups overall; trend has continued so far in 2022 so is planning cautiously and controlling costs tightly in an uncertain demand environment. (WW)


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  Boyd (BYD), Caesars (CZR), DraftKings (DKNG), Flutter (PDYPY), Gan (GAN), Las Vegas Sands (LVS), MGM (MGM), Penn National (PENN), William Hill (WIMHY), Wynn (WYNN) - MLB cancels opening day after sides fail to end lockout. (AP)

CONSUMER STAPLES:

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  Grocery Outlet (GO) - Fell 3.8% in after hours. Q4 adj. EPS 0.20 (exp. 0.20), Q4 revenue USD 782.7mln (exp. 778.4mln). On a 13-week basis, comp store sales -1.2% (vs +7.9% Y/Y). Sees FY22 adj. EPS between 0.92-0.97 (exp. 1.02), sees FY22 revenue between 3.33-3.38bln (exp. 3.4bln); sees FY22 comp sales up between 4-5%. (GO)

FINANCIALS:

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  MasterCard (MA) - In an update on its Russia exposure, said about 4% of its net revenues were derived from Russia in 2021, and approximately 2% of its net revenues were related to Ukraine. (MA)


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  SoFi Technologies (SOFI) - Rose 18% in after hours after Q4 losses were shallower than feared, although guidance for the next quarter was a little light which management said incorporated the negative impact of the unexpected extension of the federal student loan payment moratorium.. Q4 adj. EPS -0.15 (exp. -0.17), Q4 revenue USD 286mln (exp. 279.3mln). Sees Q1 adj. revenue between USD 310-320mln (exp. 306mln), and sees FY22 adj. revenue around USD 1.57bln (exp. 1.45bln). (SOFI)


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  Credit Suisse (CS) - Reportedly sent letters to investors requesting that they destroy/erase confidential documentation which relates to the securitisation of loans against "jets, yachts, real estate and/or financial assets". (FT)


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  Banca Monte Dei Paschi (BMDSD), Axa (AXAHY) - Italy reportedly to offer Axa and Anima opportunity to invest in Monte Dei Paschi's capital increase. (Newsquawk)


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  Aviva (AVVIY) - FY21 adj. Operating Profit GBP 1.63bln (prev. 1.80bln), Total Dividend 0.2205 (prev. 0.21), Life New Business Sales GBP 36.7bln (prev. 29.9bln), General Insurance GBP 8.8bln (prev. 8.3bln). Giving each employee GBP 1k in shares. Increasing cost saving target. Propose capital return of GBP 2.75bln. (Newsquawk)

HEALTH CARE:

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  Abbott (ABT) - After an investigation, FDA suggested not to use recalled Similac, Alimentum, or EleCare powdered infant formulas produced at Abbott Nutrition's Sturgis facility in Michigan. (FDA)

ENERGY:

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  NatGas - Yamal-Europe pipeline has resumed eastbound gas flows to Poland from Germany, according to Gascade data. (Reuters)


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  ExxonMobil (XOM) - Exxon to discontinue operations at Sakhalin-1, make no new investments in Russia. (XOM)


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  Halliburton (HAL) - Opened its first oilfield specialty chemical facility in Saudi Arabia. (HAL)


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  Marathon Petroleum (MPC), Neste (NTOIY) - Marathon Petroleum to form JV with refiner Neste for its Martinez renewable fuels project in California, the latest partnership between an oil company and a biofuels producer. Marathon is converting Martinez to produce renewable fuels after idling the facility in 2020, pending environmental permits. (Reuters)


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  Hess Corporation (HES) - Fell 0.9% in after hours. Boosted quarterly dividend +50% to 0.375/shr (prev. 0.25), repaid remaining USD 500mln of a USD 1bln term loan maturing March 2023. Reaffirmed Q4 net production between 360-370K BOE/D ex-Libya. Cash costs for Q1 ex-Libya now seen between 15-15.50 per barrel of oil equivalent (prev. 13.50-14.00) due to lower production volumes as well as increased production taxes resulting from higher oil prices. (HES)

MATERIALS:

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  Glencore (GLNCY) - Reviewing all activities, including stakes in EN+ and Rosneft; has no operational footprint in Russia. (FT)

UTILITIES:

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  Southwest Gas (SWX) - Will separate Centuri into independent company creating two focused, independent companies which management says will unlock stockholder value. (SWX)


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  Eni (E) - Plans to sell its stake in the Blue Stream gas pipeline linking Russia to Turkey which it currently co-owns with Gazprom. (Newsquawk)

INDUSTRIALS:

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  Boeing (BA) - Boeing has suspended parts, maintenance and support for Russian airlines. (Reuters)


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  United Continental (UAL) - United joins other US peers in avoiding Russian airspace. (Bloomberg)


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  US airspace - President Biden announced a ban on Russian aircraft from US airspace. (CNN)

AUTOMAKERS:

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  Ford Motor (F) - Ford will on Wednesday announce a reorganisation under which its EV and internal-combustion engine units will be run as separate businesses, a move to fast track growth in EVs; EV and ICE businesses will have separate names but will remain under the Ford corporate umbrella. Ford to hold news conference at 08:00EST/13:00GMT. (Reuters)


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  Rivian Automotive (RIVN) - Rivian launches 600-HP dual-motor R1S and R1T; is to raises prices on its quad-motor. (CNET)


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  BMW (BMWYY) - Halts production in Russia and stops exports to the country. (WSJ)

02 Mar 2022 - 10:08- Fixed IncomeGeopolitical- Source: Newsquawk