Newsquawk

US EARLY MORNING: US equity futures resume downside after the Monday rebound

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EQUITIES: APAC stocks fell after the Wall St. rebound; Europe opened with gains, although the upside has been pared back. US equity futures are between 0.4 to 1.3% lower (the growth proxy Nasdaq-100 leads the downside, while the value focussed Dow is more cushioned, but still under pressure). The cautious set up is being attributed to continued geopolitical tensions regarding Ukraine, while there is also some angst ahead of Wednesday’s FOMC meeting, where the central bank will likely guide a March rate hike; some analysts have been talking up a hawkish trajectory for the Federal Funds Rate this year, which could heap further pressure on the growth-orientated Nasdaq, as higher rates lower the present value of future profits. Goldman Sachs says equities tend to digest higher bond yields eventually during Fed hiking cycles as long as the growth/rates mix is favourable, but the bank says there is the risk that a rates shock triggers a growth shock. "That risk looks higher, as inflation pressures are much higher than since the 1980s," the bank writes, "Since the 90s the Fed has been countercyclical – a key question is if there is still a Fed put, how much lower the strike is and how it evolves in function of inflation and labour markets." GS flags the potential for near-term volatility. The bank says it likes quality stocks in this environment, with strong balance sheets and moderate valuations, as well as stocks with high pricing power. Earnings will also be a focus today, with a heavy docket that includes the likes of GE, JNJ, RTX, AXP, NEE, VZ, LMT, TXN, MSFT.

BONDS: Treasury yields are bear-flattening, with nominal yields higher by 3-6bps across the curve, wit underperformance once again in the belly of the curve ahead of Wednesday’s FOMC, where the central bank is likely to signal a March rate rise. Major curve spreads are flatter to the tune of 3-4bps, but 5s30s and 10s30s are only mildly flatter. Monday’s 2yr note sale was solid, with yields above 1.0% drawing decent demand, despite the proximity to Wednesday’s FOMC meeting; a 5yr auction today will be eyed to see if similar dynamics play out. The data docket is fairly benign, although the Richmond Fed survey and could provide some food for thought ahead of the ISM report due February 1st, while the Conference Board’s gauge of Consumer Confidence will provide some insight into consumer inflation expectations.

DOLLAR: The Dollar Index is trading around 20bps higher, above the 96.00 mark, supported by a cautious risk tone, higher yields and geopolitical tensions, although one might argue that the latter isn’t being overly reflected in FX with the CHF, JPY and XAU all lower against the buck. With FOMC around the corner, Citi still sees broader risk conditions playing a more important role for the dollar than the Fed for now, as highlighted by dollar’s strength despite the pullback seen in hawkish Fed expectations, the bank said. Activity currencies in G10 are subdued, but the AUD was more resilient to the Buck’s upside after higher-than-expected inflation data ahead of next week’s RBA; many desks have been upping their calls for the trajectory of RBA policy in recent days. Meanwhile, there is nothing to cheer in the EMFX space which are generally trading lower against the USD.

CRUDE: Major crude benchmarks are 1.10-1.20 higher. Analysts are looking for weekly energy inventory data to show crude stocks drawing 0.4mln, distillates drawing 1.3mln, though gasoline stocks are seen building 2.4mln. Geopolitics is also being eyed; Rabobank warns markets were significantly mispricing the odds of an impactful war happening over Ukraine, which could inject major volatility into energy assets. "With Russia a critical global energy exporter at a time of soaring prices, Ukraine a (declining) conduit point to the EU, the NordStream 2 gas conduit caught in geopolitical crosshairs, and Europe already deep in the grip of an energy crisis, war between Russia and Ukraine would be a nightmare scenario for markets," the bank writes, where oil could hit USD 125/bbl.

DAY AHEAD 25/JAN:

11:00GMT/06:00EST: Brazil FGV Consumer Confidence (JAN)

11:00GMT/06:00EST: UK CBI Business Optimism Index (Q1)

11:00GMT/06:00EST: UK CBI Industrial Trends Orders (JAN)

11:15GMT/06:15EST: General Electric Co (GE) earnings (preview)

11:25GMT/06:25EST: Johnson & Johnson (JNJ) earnings (preview)

11:55GMT/06:55EST: Raytheon Technologies Corp (RTX) earnings (preview)

12:00GMT/07:00EST: Mexico Economic Activity (NOV)

12:00GMT/07:00EST: American Express Co (AXP) earnings (preview)

12:30GMT/07:30EST: Nextera Energy Inc (NEE) earnings (preview)

12:30GMT/07:30EST: Verizon Communications Inc (VZ) earnings (preview)

12:30GMT/07:30EST: Lockheed Martin Corp (LMT) earnings (preview)

13:55GMT/08:55EST: US Redbook (22/JAN)

14:00GMT/09:00EST: US S&P/Case-Shiller Home Price (NOV)

14:00GMT/09:00EST: US FHFA House Price Index (NOV)

15:00GMT/10:00EST: US Richmond Fed (JAN)

15:00GMT/10:00EST: US CB Consumer Confidence (JAN)

16:30GMT/11:30EST: US 52-Week Bill Auction

17:00GMT/12:00EST: Brazil Federal Tax Revenues (DEC)

18:00GMT/13:00EST: US 5-Year Note Auction

21:00GMT/16:00EST: South Korea Consumer Confidence (JAN)

21:00GMT/16:00EST: Texas Instruments Inc (TXN) earnings (preview)

21:10GMT/16:10EST: Microsoft Corp (MSFT) earnings (preview)

21:30GMT/16:30EST: US API Crude Oil Stock Change (21/JAN)

Full Daily Economic Releases (25/Jan)

Full Daily US Earnings Estimates (25/Jan)

GEOPOLITICS:

NATO: Allied ships from the NATO Naval Striking and Support Forces Command and the US Sixth Fleet initiated a series of patrolling activities across the Mediterranean Sea, within the framework of "Neptune Strike 2022," a long-planned effort. It will be carried out until 4 February.

UKRAINE: Ukrainian President "does not think there’s any remotely imminent threat to Kyiv" at the moment; other reports noted that a full-scale invasion of Ukraine was the least likely of the possible outcomes; analysts lean towards further annexation or a "limited operation". US military ordered several hundred US troops on standby to potentially deploy to Eastern Europe amid heightened tensions in case they are needed to support Ukrainians evacuate.

US/RUSSIA: State Department said the US would send a written response to Russia this week, and that there was no ambiguity about the response if Russia attacked Ukraine. Elsewhere, the Treasury Department shortened the extension of general licenses for Russia's Gaz Group, which it extended for only 90 days due to the current situation with Russia.

IRAN: Secretary of State Blinken said returning to the Iranian nuclear deal was still the preferred option, but talks cannot be allowed to drag on for too long. State Department announced that Richard Nephew is no longer the Deputy Special Envoy for Iran.

NORTH KOREA: North Korea fired two cruise missiles on Tuesday morning; if confirmed, would mark the fifth such action this year by North Korea, after the pariah nation said it would bolster its defences against the US and would evaluate "restarting all temporally suspended activities".

ECONOMY:

GERMANY: Ifo Current Conditions 96.1 in January (exp. 96.3, prev. 96.9), Expectations 95.2 (exp. 93.0, prev. 92.7), Business Climate 95.7 (exp. 94.7, prev. 94.8). Ifo said the economy started 2022 with a glimmer of hope, but it was too early to talk about a turnaround. Survey reported a slight easing of supply shortages, noting that raw materials and prelim product supply issues had eased. However, there was no easing of prices, and at least every second industrial firm was planning additional price hikes.

PBOC: China's central bank injected CNY 150bln via 14-day reverse repos with the rate at 2.25% for a CNY 50bln net injection.

MAS: In an unscheduled policy meeting, Singapore's central bank will slightly raise the appreciation of the SGD NEER policy band, but left the width of the band and level of which it is centred unchanged. Said the move was to ensure medium-term price stability.

AUSTRALIA: CPI +3.5% Y/Y in Q4 (exp. 3.2%), +1.3% Q/Q (exp. 1.0%). Westpac noted that core inflation is now above the mid-point of the RBA's inflation target, not something the RBA was expecting in its forecast profile this early nor of this magnitude. Westpac added that it was clear that at +3.5% Y/Y, the current pace of inflation is running ahead of where it thought it would be at the end of 2021, pointing to upside risks to its June 2022 forecasts of 3.3% Y/Y.

SOUTH KOREA: Advance Q4 GDP +1.1% Q/Q (exp. +0.9%), +4.1% Y/Y (exp. +3.7%); GDP grew +4.0% in 2021, fastest since 2010. UOB said the robust economic backdrop and higher inflation suggest that the BOK will proceed with its monetary policy tightening this year; UOB maintained its forecast for another +50bps hike to 1.75% by end-2022 given the hawkish posturing, likely with 25bps each in 2Q and 3Q.

POLITICS:

GERMANY: Chancellor Scholz can see current measures were working, wants to continue with them. Added that Germany will probably reach the peak of Omicron wave by the middle of February.

ITALY: Italian legislators were unable to elect a new President in the first voting round.

UK: Under pressure UK PM Johnson had a birthday party during lockdown in June 2020 despite rules forbidding social gatherings indoors, according to ITV, where up to 30 people are said to have attended the event in the Cabinet Room.

EQUITY NEWS:

TECH:

International Business Machines (IBM) - Rose after hours following decent Q4 earnings, where it saw the best rate of sales growth in more than a decade. Q4 EPS 3.35 (exp. 3.30), Revenue 16.70bln (exp. 15.96bln). Now has 3,800+ hybrid cloud platform clients (+1,000 Y/Y). (Newsquawk)

Alphabet (GOOG) - Google sued by four US states, which allege that the tech giant deceived consumers by recording their location even after users tried to turn off the company’s tracking on their smartphones and web browsers. (WSJ)

Amazon (AMZN) - Amazon reported injury figures for 2020 showing worse-than-average safety rates in its US warehouses but a better record than peers in delivery. (Reuters)

Ericsson (ERIC) - Profits lifted by 5G network kit demand. Q4 revenue SEK 71.3bln (exp. SEK 68.1bln). Adj. operating profit SEK 12.3bln (prev. SEK 10.0bln). Net SEK 10.1bln (prev. 7.2bln Y/Y). Gross margin 43.5% (prev. 40.6% Y/Y). Organic sales +2% Y/Y. Proposes dividend of SEK 2.50/shr (exp. 2.18/shr). Affirms long term EBITA margin. (Reuters)

Logitech (LOGI) - Revenue and profits top expectations, raises guidance. Q3 revenue USD 1.63bln (exp. USD 1.51bln), EPS USD 1.55 (exp. 1.31). Raises FY22 operating profit view to USD 850-900mln (prev. USD 800-850mln), and revenue growth is seen +2-5% Y/Y (prev. flat). (Logitech)

COMMUNICATIONS:

Meta Platforms (FB) - Q4 earnings (2/Feb) will start including revenue segments for its "Family of Apps (FoA)" (Facebook, Instagram, Messenger, WhatsApp, others), as well as its "Reality Labs (RL)" segment (augmented and virtual reality related consumer hardware, software, content). (Meta Platforms)

Microsoft (MSFT), Activision (ATVI) - DoJ new antitrust chief will favour blocking problematic mergers rather than accept settlements that allow companies to proceed with their deals. (Bloomberg)

Twitter (TWTR) - Reportedly developing feature that will allow users to curate a list of people to send certain tweets to. (Input Magazine)

Goldman Sachs (GS) - The bank sees Metaverse as an USD 8trln opportunity. (Bitcoin.com)

ITV (ITVPY) - To extend its evening news bulletin to one hour amid challenge from Piers Morgan show on new channel TalkTV. (Telegraph)

CONSUMER CYCLICAL:

Kohl’s (KSS) - Starboard-led Acacia (ACTG) confirms reports of USD 64/shr bid. (MarketWatch)

Lululemon Athletica (LULU) - Files to sell an additional 5.2mln common shares. (Lululemon)

Swatch (SWGAY) - Returns to profit, sees strong sales ahead. FY21 EBIT CHF 1.02bln (exp. 900mln). Revenue CHF 7.31bln (prev. 5.601bln Y/Y). Operating margin 14% (exp. 12.9%). (Reuters)

Sonoco Products Company (SON) - Will raise prices for paperboard tubes and cores by a minimum 6% from March. (Sonoco)

CONSUMER STAPLES:

Unilever (UL) - To slash thousands of management positions across its operations as activist Trian builds stake. (Reuters)

Walmart (WMT) - Mexico unit considering strategic alternatives to Central America operations. (Financial Post)

Remy Cointreau (REMYY) - Q3 revenue EUR 1.09bln (prev. EUR 780.9mln Y/Y). Cognac revenue +38.5% Y/Y, Liqueurs +39.1% Y/Y, Partner Brands +20.1% Y/Y. (Newsquawk)

Inter Parfums (IPAR) - Preannounced Q4 revenues at USD 210.8mln (exp. 171mln); sees 2021 EPS at 2.65 (exp. 2.40), sees 2022 EPS at 3.00 (exp. 2.84). (Inter Parfums)

MATERIALS:

Steel Dynamics (STLD) - Q4 EPS 5.78 (exp. 5.69), revenue USD 5.3bln (exp. 5.3bln). Notes strong domestic steel demand throughout the year supported by construction, auto, industrial sectors. Customer steel inventories remained historically low; steel supply not sufficient to meet robust demand during the year. Believes market dynamics are in place for domestic steel consumption to increase further in 2022 Y/Y. (Steel Dynamics)

Rio Tinto (RIO) - Settles feud with Mongolia over Oyu Tolgoi copper mine; Oyu Tolgoi project will now move forward. (Reuters)

ENERGY:

Marathon Petroleum (MPC), Chevron Corp (CVX), BP (BP) - Talks with Unions for a new national contract for US refinery and chemical plant workers intensified on Monday; companies were making "tough, concessionary demands". (Reuters)

INDUSTRIALS:

Toyota (TM) - To produce around 11mln cars in the fiscal year from April if chip supply is stable; would represent +20% vs current fiscal year. (Nikkei)

Tesla (TSLA) - Moody's upgrades Tesla to Ba1; outlook positive. (Moody’s)

Hyundai Motor (HYMLY) – Earnings missed forecast. Q4 net KRW 547bln (exp. KRW 1.5tln), operating profit KRW 1.5tln (exp. 1.7tln), revenue KRW 31tln (exp. 30.1tln). (MarketWatch)

Volkswagen (VWAGY) - To collaborate with Bosch on automated driving software, could be sold to other autos in the future. Level 2 'hands free' technology to be deployed in the Volkswagen fleet in 2023.

Stellantis (STLA) - Opens third production unit at plant in Mulhouse, France; will add 850 jobs. (Les Echos)

CSX Corporation (CSX) - Announced appointment of Sean Pelkey as EVP and CFO (CSX).

IAG (ICAGY) - Reportedly in talks to buy a 50% stake in Air Europa. (El Confidential)

FINANCIALS:

Abrdn (SLFPY) - Looking into how investors can purchase 'tokens' in buildings, funds and infrastructure assets; work is taking place with Citigroup (C) on blockchain technology. (Times)

DWS (DWS GY) - Deutsche Bank (DB) alerted Bafin to a EUR 160k payment made by a client to one of its most senior bankers. (FT)

Credit Suisse (CS) - Flags litigation provisions of around CHF 500mln, expected to negatively impact Q4 pre-tax to around break-even. (CNBC)

BNP (BNPQY) - Reportedly approaching possible buyers for its Spanish private banking division. (Expansion)

Zions Bancorporation (ZION) - Reported lower earnings in Q4 as higher noninterest income was offset by higher credit costs and expenses. EPS of 1.34 (exp. 1.31), NIM 2.58% (exp. 2.62%), NII USD 553mln (exp. 558mln). Non-interest income USD 190mln, expenses +5% Y/Y. (MarketWatch)

Brown & Brown (BRO) - Revenue and earnings topped estimates in Q4 (MarketWatch).

Unicredit (UNCRY) - Received five non-binding offers for parts of its leasing business, but no bid for the entire leasing business. (Reuters)

HEALTH CARE:

Regeneron (REGN), Eli Lilly (LLY) - FDA revises EUA for Regeneron and Eli Lilly's COVID antibody treatments to limit their use, said drugs were unlikely to work against Omicron. (Reuters)

Roche (RHHBY) - Evrysdi granted FDA priority review for babies with spinal muscular atrophy. (Roche)

Allscripts Healthcare Solutions (MDRX) - Preannounced Q4 revenues at between USD 390-395ln (exp. 385mln); also announced new USD 250mln share repurchase programme (Allscripts).

PetMed Express (PETS) - Q3 earnings missed estimates, declined Y/Y. (RTTNews)

SmileDirectClub (SDC) - Announced strategic actions to increase profitability; to quit some countries, lay off workers. (SmileDirectclub)

QIAGEN (QGEN) - Completed the US federal contract to equip local public health authorities with QIAcuity digital PCR system for COVID-19 surveillance. (QIAGEN)

Orpea (ORRRY) - Refuted Le Monde article which claimed alleged mistreatment of elderly in retirement homes. (Orpea)

Diasorin (DASOY) - Board has full confidence in CEO, expects him to be cleared in the insider-trading investigation. (Newsquawk)

Lundbeck (HLUYY) - Vyepti approved by EU Commission for the preventive treatment of migraine in adults. (Lundbeck)

Evotec (EVO) - Entered a target and drug discovery partnership with Boehringer Ingelheim, focusing on induced pluripotent stem cell-based disease modelling for ophthalmologic disorders. (RTTNews)

UTILITIES:

PG&E (PCG) - Proposes nearly 1,600 MW of new battery energy storage capacity; projects expected to deliver clean energy to customers by 2024. (PG&E)

REAL ESTATE

Home24 (H24) - Q4 revenue EUR 152mln (prev. EUR 152mln Y/Y), cuts FY21 EBTIDA and revenue outlook amid weakness in its Brazilian market. (Home24)

OTHER:

SHEIN - Chinese fashion retailer SHEIN revives plan for New York listing in 2022. (Reuters)

GameStop (GME), AMC Entertainment (AMC) - Meme stocks among the hardest hit by Monday’s market turmoil, the latest blow to the ‘favourite bets of many online day traders’ (WSJ).

25 Jan 2022 - 09:55- Research Sheet- Source: Newsquawk