US EARLY MORNING: US equity futures continue lower in wake of hot CPI, raising fears of more aggressive policy normalisation

Global markets are trading with a risk-off theme (equities lower, Treasuries bid, USD higher, crude lower, copper lower, BTC sliding) as Wednesday’s hot CPI data for April contends the peak inflation narrative, leading to fears of more aggressive Fed policy to cap inflation. No Fedspeak is scheduled for today, leaving traders to focus on the ‘slowing growth in the face of tighter policy’ narrative.

US equity futures are lower (RTY -0.2%, YM -0.3%, ES -0.4%, NQ -0.7%), continuing the downside seen in wake of Wednesday’s hot CPI data for April, which has pricing for more aggressive Fed policy rise as the central bank tries to contain inflation pressures. These inflation fears are rapidly becoming growth fears, as some suggest the Fed will need to eventually move rates above neutral into more restrictive territory that will slow activity. These concerns are not just centred in the US: overnight, finance ministry and central bank officials in China, Japan and South Korea were warning on risks to the recovery as the COVID situation in the region remains challenging, while tighter monetary policy from advanced nations was also a threat. In Europe, ECB President Lagarde’s hawkish remarks this week have also seeing building expectations that the central bank could lift rates sooner than previously thought. In the UK growth data released today for Q1 disappointed expectations despite outperforming other developed nations, and there are risks for Q2, analysts warned, but the BoE’s Ramsden continues to flag higher rates ahead. Putting it all together, global risk assets are under pressure on Thursday morning, with activity currencies sliding, copper falling beneath USD 9,000 per tonne on demand concerns, BTC now flirting with USD 25k, as oil futures down by a couple of bucks; the IEA today revised down its view of global oil demand growth this year amid China lockdowns and elevated prices. OPEC’s monthly report will be released later in the day and is expected to echo this theme. US Treasuries are unsurprisingly bid, with yields lower by 4-8bps across the curve, with the rally most pronounced in the belly; the long-end is underperforming ahead of 30yr supply due from the Treasury in the afternoon, as well as an announcement on the size of next week’s 20yr supply. The day ahead is void of major Fedspeak, leaving traders with second-tier data (weekly jobless claims and PPI, but the sting will likely be mitigated for the latter given the hot CPI data on Wednesday) and technicals to contend with. EM traders will be eying the Banxico rate decision, where the consensus expects a 50bps rate hike. Our full 'Day Ahead' calendar can be accessed here.

KEY US EQUITY LEVELS (via Credit Suisse):

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  SPX: 3855/54, 3889/87, 3920/10, 3944, 3958, 4041, 4069, 4081, 4123/28, 4158.


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  NDX: 11768, 11878, 11980, 12090/45, 12136, 12538/42, 12717, 12805, 12927/82, 13004.


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  RUT: 1652/42, 1671/70, 1697, 1717/13, 1727, 1776, 1795/98, 1821, 1839/41, 1852.

COMMUNICATIONS:

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  Discovery (DISCA), BT (BT/A LN) - BT finalised deal to combine its sports broadcasting unit with Discovery after it achieved a 2% rise in core earnings for the FY ending March.


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  Meta Platforms Inc (FB) - Is reportedly preparing cutbacks in its Reality Labs division, according to Reuters. Meta said the division could not afford to do some projects anymore, and would have to postpone others.


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  SoftBank (SFTBY) - FY ending March revenue JPY 6.2tln (prev. 5.6tln Y/Y), FY net loss of JPY -1.7tln (prev. +5.0tln). Investment loss at Vision Fund was 3.74trln in FY21-22 (vs +6.3trln in FY20-21), Vision Fund loss was JPY 2.97trln in Jan-Mar, according to a Reuters calculation. Softbank said it recognised a loss of JPY 669.5bln relating to investments in stocks by its subsidiary.


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  Telefonica (TEF) - Net profits were lower, but better than analysts were fearing, while it confirmed its dividend for 2022. Q1 revenue EUR 9.41bln (exp. 9.07bln), Q1 OIBDA EUR 3.2bln (exp. 2.96bln), Q1 net EUR 706mln (prev. 886mln).


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  Twitter (TWTR), Tesla (TSLA) - Elon Musk is being investigated by the SEC for late notification after he purchased 5% of Twitter’s stock, WSJ reported. The FTC already has a separate probe under way.


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  Ubisoft (UBSFY) - Missed FY targets and expects profits down in 2022-23. FY21 revenue EUR 2.13bln (exp. 2.18bln), EPS 0.65 (prev. 0.85 Y/Y), FY operating profit EUR 407.6mln (exp. 426.4mln). Q4 revenue EUR 708mln (exp. 666mln), Q4 net bookings 664.2mln (exp. 685.2mln).


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  Vodafone (VOD), CK Hutchison's (CKHUY) - VOD in talks to merge UK business with CK Hutchison's Three network, FT reported.


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  Walt Disney Co (DIS) - Slipped a little over 3% after hours. Q2 adj. EPS 1.08 (exp. 1.19), Q2 revenue USD 19.25bln (exp. 20.03bln), Q2 parks, experiences and products revenue USD 6.7bln (exp. 6.12bln), Q2 total segment operating income USD 3.70bln (exp. 3.26bln), Q2 media and entertainment distribution operating income USD 1.94bln (exp. 2.09bln). Q2 Disney+ subscribers 137.7mln (exp. 134.4mln, prev. 103.6mln Y/Y); reaffirms longer term target of 230-260mln Disney+ subscribers in 2024, and plans to expand Disney+ to 53 new markets across Europe, Africa and west Asia, beginning with South Africa next week, but Disney+ growth in H2 to be impacted by the Ukraine war. Q2 ESPN+ subscribers 22.3mln (exp. 22.5mln), and Q2 ESPN advertising revenue was up 30%. Q2 Hulu & Live TV subscribers 4.1mln (exp. 4.4mln), Q2 total Hulu subscribers 45.6mln (exp. 46.6mln).

TECH:

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  Amdocs Limited (DOX) - Rose 2% after hours. Q2 adj. EPS 1.54 (exp. 1.18), Q2 revenue USD 1.145bln (exp. 1.1bln), +10% Y/Y which an exec said reflected strong business activity building next-generation platforms for large customers like AT&T (T), T-Mobile (TMUS), and Vodafone (VOD), adding sales momentum was strong in Q2, and it ended the quarter with record-high 12-month backlog of USD 3.89bln (+10% Y/Y). Sees Q3 adj. EPS between 1.23-1.29 (exp. 1.30), and sees Q3 revenue between USD 1.14-1.18bln (exp. 1.1bln). Now sees FY22 pro-forma adj. EPS growth view of +9-12% (prev. +8-12%, exp. 4.93), and now sees FY22 revenue growth of +5.2-7.2% (exp. 4.3bln, prev. 3.4-7.4%).


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  AppLovin Corporation (APP) - Surged 22% in after hours after a mixed report. Q1 EPS -0.31 (exp. -0.08), Q1 revenue USD 625mln (exp. 815mln), Q1 EBITDA USD 276mln (exp. 210mln). Lowered FY22 revenue outlook to between USD 3.14-3.44bln (exp. 3.7bln, prev. 3.55-3.85bln), but raised FY22 adj. EBITDA view to USD 1.2bln (prev. 1bln).


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  Bumble Inc. (BMBL) - Jumped 10% after hours. Q1 EPS 13c (exp. -0.03), Q1 revenue USD 211.2mln (exp. 208.4mln). Total Paying Users increased to 3.0mln, slightly short of analyst expectations, while Total Average Revenue per Paying User rose to USD 22.76 (vs 19.99). Exec said that even amid the current dynamic operating environment, underlying momentum remains robust. Sees Q2 revenue between USD 218-221mln (exp. 224.5mln), and sees Q2 adj. EBITDA between USD 51-53mln (exp. 59mln). Sees FY22 revenue between USD 934-944mln (exp. 940mln), and sees FY22 adj. EBITDA margin 24.5-25%.


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  Hon Hai Precision Industry Co. (HNHPF) - The key Apple supplier reported Q1 net profit of TWD 29.45bln (exp. 29.76bln). Sees Q2 revenue flat Y/Y. Q2 revenues for smart consumer electronics seen declining Y/Y. Q2 revenue for components and other products is seen growing significantly Y/Y. Q2 revenue for computing products also seen growing significantly Y/Y, as is Q2 revenues for cloud and networking products.


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  Lam Research (LRCX) - Announced a USD 5bln share repurchase programme and quarterly dividend of USD 1.50/shr (exp. 1.50).


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  Marqeta, Inc. (MQ) - Rose 3.5% after hours. Q1 EPS -0.11 (exp. -0.08), and Q1 revenue USD 166.1mln (exp. 161.3mln). Sees Q2 revenue growth of between +46-48% (exp. 167.7mln), and sees Q2 adj. EBITDA margin contraction of between 10-11%.


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  Sonos, Inc. (SONO) - Jumped almost 8% after hours, paring back a large chunk of the 8.6% downside it saw in regular trading on Wednesday. Q2 adj. EPS 0.26 (exp. 0.07), Q2 revenue USD 399.8mln (exp. 350.3mln). Reiterated its FY22 revenue outlook of between USD 1.95-2bln (exp. 1.97bln), and reaffirmed its FY22 adj. EBITDA outlook of USD 290-310mln. Introduced "Sonos Voice Control" which is "a first voice experience created purely for listening on Sonos".

CONSUMER STAPLES:

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  Beyond Meat, Inc. (BYND) - Fell over 20% after hours. Q1 EPS -1.58 (exp. -1.01), Q1 revenue USD 109.5mln (exp. 112.4mln). Q1 household penetration increased, and it saw signs of post-pandemic resumption of growth, but the purchase rate and frequency declined Y/Y. Exec said it was taking measures to lower cash consumption. Company reiterated FY22 revenue outlook of USD 560-620mln (exp. 588.9mln). Exec said operating environment continued to be affected by near-term uncertainty related to macroeconomic issues, including inflation and rising interest rates, COVID-19 and its potential impact on consumer behaviour and demand levels, labour availability and supply chain disruptions, partially attributable to recent geopolitical tensions.

CONSUMER CYCLICAL:

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  Dutch Bros Inc. (BROS) - Skidded 37% after hours. Q1 adj. EPS -0.02 (exp. 0.01), Q1 revenue USD 152.2mln (exp. 145.6mln). Q1 same shop sales 6.0%, and sees Q2 same shop sales flat to slightly negative. Sees FY22 revenue between USD 700-715mln (exp. 717.2mln). Lowered FY EBITDA view to USD 90mln (prev. 115-120mln).


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  Lordstown Motors (RIDE), Hon Hai Precision Industry Co. (HNHPF) - Lordstown and Foxconn close asset purchase agreement, enter into JV agreement for MIH based EV development.


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  Rivian Automotive, Inc. (RIVN) - Rose over 5% following results. Q1 adj. loss per share of 1.43 (exp. -1.44), Q1 revenue USD 95mln (exp. 130.5mln), Q1 EBITDA -1.14bln (exp. -1.16bln). Exec said demand for its products continued to grow, and its new reservation system will help it better navigate a large demand backlog with inflation uncertainties and planned content changes. RIVN said that since March 31st, it has been forced to stop production for longer periods than anticipated, resulting in approximately a quarter of the planned production time being lost due to supplier constraints. FY22 production view maintained at 25k vehicles. Sees FY22 adj. EBITDA -4.75bln, and sees FY22 CapEx at USD 2.6bln.


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  Tod's (TDPAY) - Kept FY goals despite China risks. Q1 revenue EUR 220mln (exp. 208mln), +20% Y/Y in constant currency.

INDUSTRIALS:

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  Ferguson (FERGY) - Confirmed its primary stock listing on NYSE.


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  Renault (RNLSY), Nissan Motor (NSANY), Mitsubishi Motors (MMTOY) - Renault will discuss forming a new EV company with alliance partners Nissan and Mitsubishi Motors, Nikkei reported.


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  Rolls-Royce (RYCEY) - Said YTD financial performance had been in-line with expectations, FY22 guidance unchanged. Continues to expect positive performance despite ongoing risks and macro uncertainties. Strong order backlog gives it confidence on revenue, profit and cash conversion vs headwinds of inflation and supply risks.


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  Siemens (SIEGY) - Will leave Russia, and take a charge; flags further financial headwinds from exit. Q2 revenue EUR 17.04bln (exp. 16.72bln). Q2 adj. EPS EUR 1.50 (exp. 2.07). Industrial Business Margin 11% (exp. 15%). Industrial Business Profit 1.78bln (exp. 2.37bln). Reaffirms FY guidance. Will book a charge of EUR 600mln in Q2 from its Russian business wind-down.


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  ThyssenKrupp (TKAMY) - ThyssenKrupp's exploring forming JV between its Automotive unit and NSK Steering.


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  Volkswagen (VWAGY) - Confirmed it will launch an all-electric pick-up and SUV in the US.

MATERIALS:

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  Celanese Corporation (CE) - Confirms force majeure for Acetyl Chain and Acetate Tow products for customers in the Western Hemisphere. Comes as a result of unanticipated interruptions in raw material supply in the Texas Gulf Coast, is continuing to assess the regional and global impact of these interruptions.


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  HeidelbergCement (HDELY) - Profits fell in Q1, but it sticks to its targets. Q1 EBITDA EUR 394mln, Q1 revenue EUR 4.43bln (exp. 4.30bln). Reaffirmed FY Revenue growth view of "significant increase" and FY ROIC at around 9%.


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  Rio Tinto (RIO) - Has started producing tellurium at its Kennecott copper operation in Utah.

ENERGY:

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  Maersk Drilling (DRLCO) - Q1 revenue falls, but keeps outlook unchanged. Q1 revenue USD 248mln (prev. 320mln Y/Y), Q1 backlog USD 2.1bln (prev. 1.9bln Q/Q). Affirms FY adj. EBITDA and CapEx guidance.


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  Phillips 66 (PSX) - Phillips 66 will move forward with Rodeo Renewed–the project to convert its San Francisco Refinery in Rodeo, California–into one of the world’s largest renewable fuels facilities. The project is expected to cost USD 850mln and begin commercial operations in Q1 2024.


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  TotalEnergies (TTE), Duke Energy Corp (DUK) - Total (bid USD 155mln), Duke (bid USD 160mln) won US offshore wind leases in off North and South Carolina. The auction. It was Total's second offshore wind lease won this year.

HEALTHCARE:

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  AmerisourceBergen (ABC), Walgreens Boots Alliance (WBA) - Walgreens sells 6mln AmerisourceBergen shares for USD 900mln.


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  Cardinal Health (CAH) - Awarded a USD 2.25bln contract modification from the US Department of Defense.

FINANCIALS:

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  Aegon (AEG) - Net profits rose in Q1, while US claims also improved. Q1 net EUR 412mln (prev. 386mln Y/Y), Q1 operating profit EUR 463mln (prev. 431mln).


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  Allianz (ALIZY) - Q1 net profits fell sharply after provisions over funds, while it kept FY outlook unchanged and said it was on track to meet FY targets. Q1 revenue EUR 44.0bln (exp. 43.62bln). Property & Casualty Operating Profit EUR 1.38bln (exp. 1.31bln). Life & Insurance Operating Profit EUR 1.21bln (exp. 1.11bln). Reaffirms FY22 operating profit target.


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  CME Group (CME) - Chair/CEO to appear at House Agriculture Committee hearing on Thursday to review an FTX proposal to launch an altered clearing model; expected to argue that FTX's proposal is deficient and poses significant risk to market stability and market participants.


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  Commerzbank (CRZBY) - Reported higher net profits despite Ukraine, while it reduced exposure to Russia, and confirmed FY outlook. Q1 revenue EUR 2.80bln (exp. 2.26bln). Q1 operating profit EUR 544mln (exp. 373mln). Q1 net income EUR 298mln (exp. 208mln). CET1 ratio 13.5% (exp. 13.6%). Reaffirms FY guidance.


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  Zurich Insurance (ZURVY) - Q1 P&C gross premiums at USD 11.9bln (prev. 11.0bln Y/Y).

12 May 2022 - 09:36- EquitiesData- Source: Newsquawk