US EARLY MORNING: US equity futures flat ahead of key ISM data and mega-cap tech earnings

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  EQUITIES: APAC equities were higher but gains were mostly capped amid mass closures for China’s Lunar New Year holiday; Europe opened solidly higher after positive leads from Wall Street and APAC. At pixel time, US equity futures are around flat, following Monday's rally where gains were underpinned by soothing policymaker commentary, which we recap below; the message is that while policy tightening is coming, the degree to which the Fed hikes will be driven by the data, with some policymakers cautioning against an aggressive normalisation. Additionally, there have been soothing comments from the Treasury's economist on inflation. The central bank speakers slate is quiet on Tuesday, leaving traders to focus on data (ISM, JOLTs out of the US; final manufacturing PMIs in Europe), geopolitics (Blinken/Lavrov call in the US morning) and earnings (Google after the US close today); Apple’s earnings last week gave some confidence regarding the health of highly concentrated mega-caps after the recent rout, and this theme will be put to the test with the mega-caps that are left to report this week (after Google today, Facebook is due Wednesday, Amazon due Thursday). As we have noted previously, many desks have also been talking-up buying-the-dip plays after the recent rout, a theme that was subject to a Barron's piece over the weekend. 


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  TREASURIES: Treasury yields are bull-flattening slightly; yields are lower by 0-3bps, with the belly seeing most of the outperformance on soothing policymaker commentary, partially easing fears about an aggressive monetary policy course which derails growth momentum. Currently, money markets are discounting the Federal Funds Rate target will be 1.00-1.25% by the end of the year, with some probability seeing the 1.25-1.50% range, which would imply four 25bps rate hikes over the rest of this year, with risks of another. While some have reasoned a 50bps move could be in the offing, this is not something which has broad-based support among officials, perhaps leaving the potential for hikes at every meeting this year, rather than a big move (data dependent, of course). Additionally, it is worth noting that, with the Fed carefully monitoring how inflation progresses, the data-dependent approch of policy could be seen in the market reactions to key data this week (the ISMs, as well as the NFP), where we will be paying particular attention to the inflation and wages metrics; if these disappoint, it would be reasonable to assume that the trajectory for Fed rate hikes will adjust accordingly. 


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  DOLLAR: Activity currencies are generally higher against the Buck, but the AUD is lagging after the RBA's statement language wasn't as hawkish as some had anticipated. EMFX is generally higher, although the TRY lags ahead of Thursday's inflation report, while the Indian INR is lower after a budget update, where it will spur spending on infrastructure.


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  CRUDE: Crude benchmarks are lower ahead of the OPEC meetings this week (JTC today), while weekly energy inventory data is expected to show crude stocks building 1.8mln barrels, distillates drawing 1.7mln, gasoline building 1.4mln. Analysts expect OPEC will continue with a gradual easing of its supply output curbs, although there remain questions about the degree of spare capacity which they have, while many remain confident on the demand outlook.

DAY AHEAD FEBRUARY 1ST:

• OPEC JTC Meeting


• Mid-Morning EST: Russia’s Lavrov, US’ Blinken call


• 10:00GMT/05:00EST: EZ Unemployment Rate (DEC)


• 10:00GMT/05:00EST: France New Car Registrations (JAN)


• 10:00GMT/05:00EST: Italy New Car Registrations (JAN)


• 10:30GMT/05:30EST: Germany 2-Year Schatz Auction


• 11:00GMT/06:00EST: United Parcel Service Inc (UPS) earnings (preview)


• 11:30GMT/06:30EST: Spain New Car Sales (JAN)


• 12:00GMT/07:00EST: Brazil PPI (DEC)


• 12:00GMT/07:00EST: Mexico Business Confidence (JAN)


• 12:00GMT/07:00EST: South Africa Total New Vehicle Sales (JAN)


• 12:30GMT/07:30EST: Exxon Mobil Corp (XOM) earnings (preview)


• 13:00GMT/08:00EST: Brazil Manufacturing PMI (JAN)


• 13:30GMT/08:30EST: Canada GDP (NOV)


• 13:55GMT/08:55EST: US Redbook (29/JAN)


• 14:00GMT/09:00EST: ECB Weekly Asset Purchases Data


• 14:30GMT/09:30EST: Canada Manufacturing PMI (JAN)


• 14:45GMT/09:45EST: US Manufacturing PMI Final (JAN)


• 15:00GMT/10:00EST: US ISM Manufacturing PMI (JAN) (preview)


• 15:00GMT/10:00EST: US JOLTs (DEC)


• 15:00GMT/10:00EST: US Construction Spending (DEC)


• 15:30GMT/10:30EST: Mexico Manufacturing PMI (JAN)


• 15:30GMT/10:30EST: US Dallas Fed Services (JAN)


• 16:00GMT/11:00EST: Bundesbank's Buch


• 18:00GMT/13:00EST: Brazil Balance of Trade (JAN)


• 21:05GMT/16:05EST: Alphabet Inc (GOOGL) earnings (preview)


• 21:05GMT/16:05EST: Starbucks Corp (SBUX) earnings (preview)


• 21:15GMT/16:15EST: Advanced Micro Devices Inc (AMD) earnings (preview)


• 21:15GMT/16:15EST: PayPal Holdings Inc (PYPL) earnings (preview)


• 21:30GMT/16:30EST: US API Energy Inventories (28/JAN)


• Newsquawk Daily Economic Releases (1/Feb)


• Full Newsquawk US daily US Earnings Estimates (1/Feb)

ECONOMY:

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  FED: Fed's George (2022) said current very accommodative stance out of sync with the economic outlook, more aggressive balance sheet reduction could allow for a shallower rate path. Fed's Barkin (2024) said businesses would welcome higher rates, rate path dependent on inflation data, sees goods prices easing. Fed's Bostic (2024), following a weekend interview where he suggested 50bps increment hike was possible, as was a hike at every meeting this year, said a 50bps move was not his preferred action for March, adding that the Fed was not fixed policy path; sees balance sheet reduction after a few rate moves. Fed's Daly (2024) sees March hike, rates possibly at 1.25% by end-2022, but said policy shift should be gradual, does not want to raise rates too quickly that it drags on growth; added that Fed needs to keep options open, did not have a predetermined path.


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  WASHINGTON: Treasury Chief Economist Harris sees inflation pressures easing if pandemic recedes; weaker demand for goods, easing supply bottlenecks, receding pandemic expected to cut inflationary pressures in 2022. (Reuters)


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  RBA: Rates unchanged at 0.10%, announced an end to its bond purchases (as expected). Updated projections saw an upward revision to its inflation forecasts, and its statement no longer states that wage growth needed to be "materially higher" to meet its inflation target on a sustained basis. But said it was still too early to conclude that inflation was sustainably within target band, will not raise rates until inflation is sustainably within 2-3% target. Said easing bond purchases does not imply a near-term interest rate hike. Aussie bank Westpac continues to see first hike in August. (Westpac)


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  EUROPEAN PMI DATA: Final January manufacturing PMI Data showed the EZ gauge at 58.7 (exp. 59.0, flash 59.0); Markit said Eurozone manufacturers appeared to be weathering the Omicron storm better than prior COVID-19 waves, firms reported largest production and order book improvements in four months. The German data printed 59.8 (exp. 60.5, flash 60.5), with Markit noting that the sector started 2022 on the front foot, with a long-awaited upturn in performance following the slowdown throughout much of the second half of last year. The French data printed 55.5 (exp. 55.5, flash 55.5); Markit said manufacturing output growth regained some momentum, comments from panel members suggested that demand conditions remained accommodative. The UK gauge was revised up to 57.3 (exp. 56.9, flash 56.9), with Markit noting that UK manufacturing made a solid start to 2022, showing encouraging resilience on the face of the Omicron wave, with growth of output accelerating as companies reported fewer supply delays, though cautioned that causes for concern remain as new orders growth slowed, exports barely rose, staff absenteeism remained high and manufacturers' ongoing caution regarding supply chain disruptions led to the beefing up of safety stocks.


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  GERMANY: Retail sales -5.5% M/M in December (exp. -1.4%), 0.0% Y/Y (exp. 1.1%, prev. -2.9%); Pantheon Macroeconomics said "this is a terrible headline, but hardly surprising in light of the equally grim advance Q4 GDP growth data released last week,” adding that in short, “German consumers’ spending suffered a big hit at the end of 2021 as virus cases soared, and new restrictions were imposed" (Newsquawk). German unemployment eased to 5.1% in January (exp. 5.2%, prev. 5.2%), with SA total unemployment at 2.345mln (prev. 2.405mln, prev. 2.393mln); "The German labour market has almost left the pandemic crisis behind and is immediately facing new challenges; labour shortages are the most pressing," ING wrote, adding that "with demographic trends and the green transition both accelerating, the problem of labour shortages will rather worsen than improve over the coming years, and as a result, we expect wage pressure, at least at the sector level, to increase." (Newsquawk).


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  UK: House prices +0.8% M/M in January according to Nationwide (exp. +0.6%), with the annual rate climbing to +11.2% Y/Y (exp. 10.8%, prev. 10.4%). Strongest start to the year since 2005, annual rate at the strongest since June 2021, housing demand remained robust, mortgage approvals continued to run above pre-pandemic levels, 2021 total property transactions highest since 2007. (Nationwide)


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  BOJ: Japan's central bank is under less pressure to shift yield target than the market thinks, sources cited by Reuters said. The BoJ was unlikely to tweak its yield target, and can use other tools to moderate any rise in borrowing costs. Sources said the central bank had many tools to combat rising yields, currently prefering market operations. (Reuters)

GEOPOLITICS:

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  US/RUSSIA: US State Department said Russia delivered a written response to US proposals regarding Ukraine ahead of Tuesday's call between Foreign Minister Lavrov and State Secretary Blinken, but did not unveil details of the response (CNN); Russia's Deputy Foreign Minister denied reports that the US had received Russian written response (RIA). US weighs deploying more troops to eastern Europe beyond the 8,500 on alert (Reuters). State Department ordered families of US government staff in Belarus to evacuate the country due to Russian build up along Belarus' border with Ukraine (Axios). Russia said it would not back down in face of US sanctions threats over Ukraine, Russian embassy in the US said it was "Washington, not Moscow, that generates tensions" (AFP).
  


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  US/IRAN: US State Department said talks to return to the nuclear deal were in the "final stretch" given Iran's nuclear advances. Progress was made in narrowing differences, negotiators have returned to capitals for consultations. Official said Iran may not choose to go down the road of compliance, US was ready to deal with that contingency. (Reuters)


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  JAPAN/CHINA: Japan adopted resolution on China human rights, calls on Kishida Government to take steps to relieve the situation while working with the international community. (Reuters)


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  COVID: CDC urges Americans to avoid travel to 12 destinations including Mexico, Singapore, Chile and Brazil. (CNN)

EQUITY NEWS:

TECH:

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  NXP Semiconductors NV (NXPI) - Extended Monday's gains into the after hours. Q1 GAAP EPS 2.24 (exp. 2.99), but revenue was a little above expected at USD 3.04bln (exp. 3.00bln). Adjusted gross margin 57.3% (exp. 56.5%). Raised quarterly dividend +50% to USD 0.845/shr, and will buyback shares up to USD 2bln. Guided Q2 2022 revenue above street expectations at between 3.03-3.18bln (exp. 2.95bln). (NXPI)


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  Cirrus Logic, Inc. (CRUS) - The chipmaker initially jumped in after hours trade after reporting profits, revenues and margins above the street estimate, while guiding strongly for the next quarter. (CRUS)


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  Fabrinet (FN) - Q2 earnings and revenue topped expectations, and guided Q3 above the street's view. (FN)


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  Sanmina Corporation (SANM) - Extended gains in after hours trade. Earnings, revenues, margins above expected, as growth in its industrial, medical, defence and autos segment gave support. (SANM)


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  Siltronic (WAF GY) - GlobalWafers' Siltronic deal fails as Germany misses deadline (Reuters); GlobalWafers said it will not make another offer (Newsquawk).


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  Semis - Key EU countries support push to become a semiconductor superpower, but are worried that excessive government investment in chip production could lead to a subsidy race between EU countries or even an overproduction of chips. (Bloomberg)

COMMUNICATIONS:

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  Sony (SONY), Microsoft (MSFT) - Sony buys Bungee for USD 3.6bln, deal to heighten competition with Microsoft. (FT)


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  Electronic Arts (EA) - Chris Suh named CFO, effective March 1st. (EA)


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  T-Mobile (TMUS) - Invests USD 3bln in FCC spectrum auction to extend 5G network. (MarketWatch)


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  AT&T (T) - HBO Max prepares to launch in 15 more European countries. (Variety)


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  New York Times Company (NYT) - Acquires the new, apparently popular game, Wordle. (NYT)


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  Rogers Communications (RCI) - Glenn Brandt named CFO. (RCI)


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  Cineworld (CNWGY) - Commenced discussions with previous dissenting shareholders of Regal Entertainment, the aim of maximising available liquidity. (Reuters)


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  Vodafone (VOD) – Abrdn backed CEO's overhaul plan, in spite of the reported pressure from activist Cevian. (Telegraph)


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  Apollo (APO) - To make USD 760mln investment in Legendary Entertainment. (Globe)


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  Meta (FB) - Unveils updated 3D avatars, partnering with the NFL on avatars, adds new facial shapes and assistive devices to avatars. (Meta)

INDUSTRIALS:

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  FedEx (FDX) - Omicron surge resulted in temporary shortage of available staff; Domestic FedEx Express freight currently suspended, is implementing contingency plans and adjusting operations to minimise delays. (Reuters)


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  Boeing (BA), General Electric (GE) - Boeing secured an order of 34 777x freighters from Qatar Airways as part of the craft launch, Qatar also confirmed the purchase of 50 737 Max. Qatar deal includes 30 General Electric GE9X engines, four GE90-115B engines, as well as GE TrueChoice services. (CNBC)


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  Autos - Nokia (NOK), NTT demand patent fees from Toyota (TM), Honda (HMC) and Nissan (NSANY). 48 companies including Sony (SONY) and Qualcomm (QCOM) join moves to seek USD 15 for each connected car. (Nikkei)


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  Equifax (EFX) - To acquire Efficient Hire, bolstering its employer services portfolio. (EFX)


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  Woodward (WWD) - Fell in after hours trade as Q1 earnings, revenue missed expectations, but it authorised new USD 800mln buyback and raised dividend; company said it was seeing green shoots, and remained confident in its FY22 outlook. (WWD)


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  Hapag Lloyd (HPGLY) - FY21 (USD) - Revenue 26.4bln (prev. 22.3bln), EBITDA 12.8bln (prev. 10.9bln), EBIT 4.2bln. (Hapag Lloyd)


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  Lockheed Martin (LMT) - Awarded USD 1.42bln Air Force contract. (DoD)


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  Northrop Grumman (NOC) - To compete for each order of the USD 750mln contract for special ammunition and weapons systems. (DoD)

MATERIALS:

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  Axalta Coating Systems (AXTA) - Fell 3.75% in extended trade after Q4 results, though said it was encouraged at the early improvement in chip availability within automotive segment and was optimistic that 2022 could see a solid rebound in light vehicle production. (AXTA)


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  HeidelbergCement (HDELY) - Prelim. FY21 (EUR) revenue 18.7bln (prev. 17.6bln), RCO 2.6bln (exp. 2.5bln), RCOBD 3.8bln (exp. 3.8bln). (HeidelbergCement)


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  Rio Tinto (RIO) - Over 25% of female workers have been subject to sexual harassment, nearly 50% subject to bullying. CEO said findings were disturbing, expressed "enormous regret". (Reuters)

CONSUMER CYCLICAL:

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  ContextLogic (WISH) - Surged by 10% in afterhours trade; named former Foot Locker (FL) EMEA chief Vijay Talwar as CEO, succeeding founder who will continue to serve on the board. (MarketWatch)


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  EssilorLuxottica (ESLOY) - Launches 1.5mln share buyback. (EssilorLuxottica)


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  Playtech (PYTCY) - Takeover bid from Aristocrat is facing uncertainty. (Bloomberg)

FINANCIALS:

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  UBS (UBSG) - Q4 revenue USD 8.7bln (exp. 7.6bln), net 1.34bln (exp. 0.86bln), CET1 15.0% (exp. 14.47%). Looking to increase invested assets to over 6tln (current 4.6tln) across wealth management, asset management and P&C. Propose a dividend of 0.50/shr. Increasing buyback program to as much as 5bln, almost a doubling from prior guidance. (UBS)


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  Societe Generale (SCGLY), ING (ING) - SocGen Sign MOU to offer banking solutions to ING's retail customers in France. (Reuters)

CRYPTO:

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  Silvergate Capital (SI) - Acquires intellectual property and other technology assets related to running a blockchain-based payment network from the Diem Group (Business Wire); CEO said it hopes to launch a stablecoin by the end of this year (CNBC).

HEALTH CARE:

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  Orpea (ORRRY) - France said regional health authorities would visit all Orpea facilities, will make an announcement soon on the inspection soon. (Reuters)

ENERGY:

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  Repsol (REPYY) - Peru temporarily suspends largest refinery after an oil spill fouled the ocean off the coast of the capital Lima a fortnight ago. (Argus)

01 Feb 2022 - 09:55- EnergyData- Source: Newsquawk