US EARLY MORNING: US equity futures dragged lower as oil prices rocket

US equity futures are lower, but off lows (ES -1.5%, NQ -1.7%, RTY -2.0%, YM -1.4%). Global equities have been dragged down at the start of the week as oil prices surged to the highest since 2008 as the US and Europe consider bans on imports of Russian crude; snags in the Iran nuclear talks as well as outages in Libya are adding to upside. Brent and WTI are now trading in the USD 120s per barrel, entering a zone which some analysts argue will drive demand destruction, were prices to remain at these levels in the coming weeks/months. Higher consumer prices ­– adding to the already sharp post-pandemic inflation pressures – have led to fears of stagnation in the Eurozone, and will likely keep ECB officials cautious at their confab this Thursday. The morning data slate features decent German retail sales and industrial orders for January, although traders are seemingly more focussed on geopolitical developments; this may also render the US CPI data due later this week ­– the last before the March 16th FOMC – a secondary focus. Money markets are suggesting there is virtually no chance of the Fed lifting rates by 50bps at the meeting, but do still see a 25bps rate move; five hikes are still fully priced through the end of this year (vs seven before the Ukraine conflict). Treasury yields are a little higher on Monday morning, likely due to the inflationary implications of surging oil and commodity prices; the US will sell 3s, 10s, 30s this week, with the risk bid likely to be influential in how the supply is digested. Risk-off conditions have resulted in USD strength (both USD and crude higher this morning) taking the DXY above 99.00; havens JPY and CHF are not garnering too much of a bid against the Greenback, however – SNB officials again warned on FX levels this morning, reiterating a willingness to intervene if necessary. In EMFX, there is virtually no green on for the pairs we monitor; some Emerging Europe nations have been coordinating FX interventions last week to stabilise their currencies, and desks expect this will continue to feature. Meanwhile, cyclically focussed FX is mixed: GBP and SEK are lower, but CAD is underpinned by oil price moves, trading a touch firmer against the USD, while AUD and NZD are rallying as commodity prices rise and their geographical detachment to the Ukraine situation; they are likely also benefiting from the ‘stable’ economic approach China policymakers are seeking this year. The day ahead is devoid of any A-List scheduled events, so the focus should remain on geopolitical developments.

EQUITY NEWS: 

ENERGY:

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  Russia - US and its Allies were exploring banning imports of Russian oil, White House coordinated with key Congressional committees moving forward with their own ban. (Reuters)


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  Iran - Russia demands written guarantees from the US that sanctions imposed will not impede its ability to trade with Iran, a move that risks complicating efforts to revive the 2015 nuclear accord. (FT)


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  Venezuela - As the US mulls sanctions on Russian oil and gas exports, US officials travelled to Venezuela driven by a desire to separate Russia from its remaining Latin American allies. (NYT)


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  Libya - Libyan oil production drops to 920k BPD vs 1.2mln last Weds as political crisis deepens; Sharara, El Feel both shut. (Bloomberg)


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  UK - Britain could pump more oil and gas from North Sea; senior government source says Western countries may have to give themselves a "climate change pass". (Politico)


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  TotalEnergies (TTE) - Will remain in Russia unless the EU brings in more sanctions. (FT)


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  Pioneer Natural Resources (PXD) - The largest US shale oil operator said the US would be unable to replace crude supplies from Russia this year. (FT)


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  Occidental Petroleum (OXY), Berkshire Hathaway (BRK), Icahn Enterprises (IEP) - Berkshire Hathaway boosted its investment in Occidental, reveals USD 5bln stake (CNBC). Icahn exits OXY stake after nearly three years (WSJ).


• 
  Oasis Petroleum (OAS), Whiting Petroleum (WLL) - Close to a merger deal, could be announced this week. Combined, the two would be worth roughly USD 6bln. (WSJ)


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  Antero (AR), Chesapeake (CHK), Coterra Energy (CTRA), EQT (EQT), Range Resources (RRC), Southwestern Energy (SWN), Tourmaline (TRMLF) - Barron's identifies these seven stocks to benefit from the surge in NatGas prices. (Barron's)

CHINA:

• Biden administration will soon start a review of the first group of tariffs on more than USD 300bln in Chinese imports needed to prevent their expiration, a process likely to bring new scrutiny of their effectiveness as inflation runs at a four-decade high. (Bloomberg)


• China targeted slower economic growth of around 5.5% this year, the slowest growth target in 30 years. There were few surprises; China has put a premium on stability (Reuters). Government vows to step up monetary policy implementation, economists see more rate cuts, fiscal spending on the cards (Bloomberg).

CRYPTO:

• Switzerland to freeze Russian-owned crypto assets. (FT)

FINANCIALS:

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  Mastercard (MA), Visa (V) - Both said cards issued by Russian banks would stop functioning overseas after March 9th, a declaration that prompted some Russian banks to consider deals with China’s UnionPay. (Reuters)


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  American Express (AXP) - Suspends operations in Russia and Belarus. (Bloomberg)


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  M&T Bank (MTB), People's United Financial (PBCT) - Fed approves M&T-People's United deal. (Fed)


• 
  Credit Agricole (CRARY) - Exposure to Russia around USD 540mln at end-2021. (Newsquawk)


• Higher mortgage rates are combining with an unrelentingly expensive real-estate market to push up costs for homebuyers. (Bloomberg)

TECH:

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  Apple (AAPL), Microsoft (MSFT), Samsung Electronics (SMSN) - Samsung has suspended product shipments to Russia, joining a growing list of companies from Apple to Microsoft. (Bloomberg)


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  Cloud names - Barron's positive, says cloud stocks have Become a Haven in Tech. (Barron's)


• 
  Microsoft (MSFT) - Unveiled fourth data center in India. (Reuters)

COMMUNICATIONS:

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  Apple (AAPL), Amazon (AMZN) - Apple still in early talks with NFL about acquiring the rights to Sunday Ticket games (9to5mac). Apple rumoured to want online livestreaming rights, the NFL Sunday Ticket package, and an equity stake in NFL Media (Apple Insider). Apple, Amazon are the front-runners for Sunday Ticket (Sports Business Journal).


• 
  DoorDash (DASH), Deliveroo (ROO) - DoorDash and Deliveroo met over the summer to discuss tie-up, but deal did not materialise. In November, DoorDash swooped on Finnish rival Wolt in an all-share transaction worth EUR 7bln. (Times)


• 
  AT&T (T) - The Batman notched an estimated USD 128.5mln at the North American box office this weekend, flying past industry expectations. (CNN)


• 
  Comcast (CMCSA), Disney (DIS) - Comcast's NBC terminates deal with Disney's Hulu TV so it can keep current-season shows for Peacock. (Variety)


• 
  Activision (ATVI), Microsoft (MSFT), Coca-Cola (KO) - Activision CEO Kotick will leave Coke board before Microsoft deal closes. (CNBC)

INDUSTRIALS:

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  Boeing (BA) - Plans to nearly double its 737 Max production by 2023. (Reuters)


• 
  Leonardo (FINMY) - Prosecutors expected to in July conclude probe into suspected flawed parts made by the company for Boeing's 787 Dreamliner. (Reuters)


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  BAE Systems (BAESY), Rolls-Royce (RYCEY), Babcock (BCKIY), Meggitt (MEGGY) - UK defence budget likely to rise. (Sky)


• 
  Lockheed Martin (LMT) - Awarded USD 870mln Navy contract modification, and awarded USD 167mln Navy contract modification. (DoD)

AUTOMAKERS:

• 
  Tesla (TSLA) - Tesla's first European gigafactory in Germany has received the conditional approval, production to start in a matter of weeks. (FT)


• 
  Volkswagen (VWAGY) - Plans to proceed with Wolfsburg EV plant, will invest EUR 2bln. (Newsquawk)


• 
  Stellantis (STLA) - Looking at direct sales model to decrease costs associated with dealers. (Newsquawk)


• 
  General Motors (GM) - NHTSA orders GM to fix headlight glare problems on about 725k US SUVs. (Reuters)

UTILITIES:

• 
  Brookfield Asset Management (BAM), AGL Energy (AGLXY) - Brookfield abandoned its campaign to acquire AGL Energy after second bid was rejected. (FT)


• 
  RWE (RWEOY) - German State Lender Kfw signed MOU with RWE to construct a domestic LNG terminal. (Newsquawk)

REAL ESTATE:

• 
  WeWork (WE) - Responding to a story that it was exploring a fresh equity raise amid its stock price slump (Bloomberg), said it has no plans to issue additional equity at this time. (WE)


• 
  AvalonBay (AVB) - QTD same store residential rental revenue +7.3% Y/Y (+60bps vs company expectations). (AVB)

CONSUMER CYCLICAL:

• 
  Kering (PPRUY), LVMH (LVMUY) - Kering to temporarily close Russian stores, LVMH weighing move. (Newsquawk)


• 
  Chanel lifts prices in Europe and Asia to match levels across the world; cost of the luxury brand's products had already increased 20% over past 18 months. (FT)


• 
  Foot Locker (FL) - Barron's positive, says after being hit hard, stock is now a buy. (Barron's)

HEALTH CARE:

• 
  Johnson & Johnson (JNJ) - J&J targets Chinese biotech deals, seeks more tie-ups after existing collaboration yields new cancer treatment. (FT)


• 
  Novavax (NVAX) - Novavax' Covid vaccine moves closer to FDA authorisation decision, NVAX said it has resolved manufacturing problems that led to earlier delays. (WSJ)


• 
  AstraZeneca (AZN) - To spend additional GBP 100mln in 2022 above the budget to complete its UK R&D site, bringing the project’s spend to GBP 1.1bln. (Times)


• 
  Bristol-Myers (BMY) - FDA approves neoadjuvant nivolumab and platinum-doublet chemotherapy for early-stage non-small cell lung cancer (FDA)

07 Mar 2022 - 09:43- EquitiesGeopolitical- Source: Newsquawk