US EARLY MORNING: US index futures are around flat following FOMC

EQUITIES: APAC equities gained in wake of the FOMC and continued encouragement of Chinese policymaker support; European equities opened higher amid continued optimism in Ukraine/Russia proceedings, despite some bumps in the road seen late Wednesday. US stocks Wednesday printed their best two-day gains since April 2020, closing higher in wake of the Fed’s +25bps rate hike as Chair Powell argued that the US economy was more than strong enough to handle tighter policy. US equity futures are currently trading around flat/a touch negative.

TREASURIES: Treasuries are rallying, continuing the upside seen in wake of Wednesday’s Fed decision where initial hawkishness via the dot plots were offset by Chair Powell’s assurances that the economy was in a good place and able to digest tighter policy. Rates were lifted by 25bps, as expected (Bullard called for a 50bps move, in line with his recent commentary), and the Committee’s expectation now aligns with the market in expecting the Federal Funds Rate target will be lifted to between 1.75-2.00% by the end of this year (representing six further 25bps rate moves); in 2023, the Fed has pencilled in rates rising to 2.75-3.00, above the longer-run expectation of 2.4% (this longer-run view was cut by 10bps), suggesting that the central bank is happy to lift rates above neutral in order to bring inflation back towards target, perhaps in a front-loaded fashion – Powell noted that there were seven meetings this year, and the forecasts see seven hikes this year, which seemingly points towards a steady +25bps per meeting, although the Chair was keen to retain optionality for 50bps increments if the Fed needed. Powell dismissed concerns that tightening monetary policy would force the economy into recession, noting that the Fed is still projecting above-trend growth this year, and the economy was more than strong enough for tighter policy. Today, the Bank of England will likely lift rates by 25bps, our preview can be accessed here.

DOLLAR: The Dollar Index is lower by around 0.2% as fears around the potential sting of a hawkish Fed eased, while China policymaker support and a rebound in equities provide a soothing risk backdrop. In Asia, the KRW gained by the most in two years; the TWD also rallied – both have notable tech sectors, which often gain as Treasury yields decline (lower rates improve the net present value of tech companies’ future earnings). AUD gained after decent jobs data, and is leading gains in G10 FX. Other activity currencies are also firmer, with the SEK (a favoured risk gauge in the Russia-Ukraine War era); the Riksbank Governor appeared to have intimated the central bank will re-think its rate stance (markets were already pricing a steeper trajectory, so this may represent the beginning of an alignment). Elsewhere, the GBP is up around 0.2% ahead of today’s BoE meeting, where the Old Lady is expected to lift rates by 25bps (our preview is here). The EUR is a little higher, above 1.10 ahead of commentary from influential ECB officials ­– President Lagarde, Chief Economist Lane and Markets chief Schnabel will all speak at a conference this morning; some desks look at the EUR’s action in wake of the Fed and have been talking about selling at these levels (Refinitiv) given the ECB is unlikely to be as aggressive as the Fed in normalising monetary policy.

CRUDE: Crude benchmarks are higher by 3.60-3.90/barrel. ING says the IEA's monthly oil market report was constructive. "The agency is forecasting that from April the market could lose 3mln BPD of Russian oil supply due to the impact of self-sanctioning," arguing that "supply losses of this magnitude would be more than enough to keep the market in deficit for at least the next 2 quarters." The IEA also said that the higher prices would likely weigh on global growth, so cut its demand estimates.

EQUITY NEWS:

TECH:

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  Alphabet (GOOG) - Google I/O conference scheduled for May 11-12th. (The Verge)


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  Big Tech - US lawmakers introduce bicameral legislation to "ban anticompetitive mergers, restore competition, and bring down prices for consumers", taking aim at Big Tech, and would give authorities tools to reject deals and break up monopolies. (Senator Warren)


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  Box (BOX) - Gained 2% after hours as it presented long-term guidance at an FY23 analyst day. Sees revenue growth of 15-17% in FY25; announced new USD 150M buyback. (BOX)


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  Intel (INTC), Micron (MU), Paccar (PCAR) - CEOs of Intel and Micron will testify on March 23rd before the Senate Commerce Committee as the industry and lawmakers make the case for USD 52bln in subsidies for semiconductor chips manufacturing. Truckmaker Paccar's CEO will also testify. (Reuters)


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  Meta Platforms (FB) - Introduced "Family Centre" for parents/guardians to access supervision tools. (Meta)


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  PagerDuty (PD) - Jumped +14% in after hours; Q4 better than expected, although guidance was soft. Q4 adj. EPS -0.04 (exp. -0.06), Q4 revenue USD 78.5mln (exp. 76.1mln). Sees Q1 adj. loss per share of between 8-9c (exp. -0.06), and sees Q1 revenue between USD 81.5-83.5mln (exp. 80.2mln). Sees FY23 adj. loss per share of between 17-23c (exp. -0.19), and sees FY23 revenue between USD 360-366mln (exp. 352.7mln). (PD)


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  Semtech Corporation (SMTC) - Rose 5% after hours. Q4 adj. EPS 0.70 (exp. 0.69), Q4 revenue USD 190.6mln (exp. 189.4mln). Sees Q1 adj. EPS between 0.72-0.80 (exp. 0.70), and sees Q1 revenue at around USD 200mln (exp. 192mln). (SMTC)

COMMUNICATIONS:

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  Endeavor Group Holdings (EDR) - Rose 7.4% in after hours. Q4 EPS -0.07 (exp. 0.17), though revenue topped expectations at USD 1.5bln (exp. 1.36bln). Sees FY22 revenue between USD 5.2-5.45bln (ex. 5.1bln), and FY22 adj. EBITDA seen between USD 1.07-1.12bln (exp. 1.08bln). (EDR)

FINANCIALS:

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  Bank of America (BAC), Citigroup (C), JPMorgan (JPM), Wells Fargo & Co (WFC) - Each lifting their base rates to 3.5% from 3.25% following 25bps FOMC rate hike. (Reuters)


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  HSBC (HSBC) - Increasing climate commitments following investor pressure; agreed to phase down fossil fuel financing. (City AM)


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  UBS (UBSG), KKR (KKR) - UBS Asset Management to sell holding in its Japanese real estate JV to KKR for USD 2bln. (KKR)

CONSUMER CYCLICAL:

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  Guess (GES) - Q4 EPS 1.14 (exp. 1.15), Q4 revenue USD 799.9mln (exp. 805.9mln). Sees Q1 revenue up in the low-teens versus Q1 2022 (exp. USD 541mln), mainly driven by last year's temporary store closures, wholesale growth and positive store comps. Sees FY23 revenue to be up in the low-single digits vs FY22, and operating margin to reach approximately 10.5%, adding that the outlook reflects significant disruptions in Russia. Board expanded its repurchase authorisation by USD 100mln, leaving a new capacity of USD 249mln. Named Dennis Secor as interim CFO, succeeding Katie Anderson. (GES)


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  Lennar Corporation (LEN) - Rose 1.7% after hours. Q1 EPS ex-items 2.70 (exp. 2.60), revenue 6.20bln (exp. 6.08bln), authorises USD 2bln repurchase programme. Q1 net new orders 15,747 (exp. 15,033), Q1 gross margin on home sales 26.9% (exp. 26.8%), backlog 27,335 (exp. 26,220). LEN said that the housing industry continues to exhibit strong demand, outweighing supply, and it is confident that it can continue to generate solid growth and enhance its current market position. Sees Q2 deliveries between 16,000- 16,300 (exp. 16,233). (LEN)


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  Nordstrom (JWN) - Rose 0.5% after hours. Reinstates quarterly dividend at 0.19/shr, as it signalled it would after its recent earnings report. NOTE: JWN's dividend was 0.37/shr pre-pandemic. (JWN)


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  Swiss Watch Exports +24.4% Y/Y in February at CHF 1.994bln (prev. +6.8% Y/Y at CHF 1.7bln). (Newsquawk)


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  Williams-Sonoma (WSM) - Gained over 8% after hours. Q4 adj. EPS 5.42 (exp. 4.82), Q4 revenue USD 2.5bln (exp. 2.6bln). Q4 comp brand revenue growth 10.8% (exp. 11.3%), including West Elm at 18.3% (exp. 18%), Pottery Barn 16.2% (10.5%), and Williams Sonoma 4.5% (exp. 6.7%). Announced USD 1.5bln stock repurchase, and boosted quarterly dividend +10% to USD 0.78/shr. Sees FY22 to be in line with its long-term financial guidance of mid-to-high single digit annual net revenue growth (exp. +2.5%), increasing revenues to USD 10bln by FY24, operating margins relatively in-line with FY21 operating margin. (WSM)

ENERGY:

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  TotalEnergies (TTE) - Reportedly cuts cost at French fuel stations by EUR 0.10/litre (Newsquawk). Separately, the Church of England pensions board urges Total to reconsider Russian assets, and is assessing its shareholdings in Total (City AM).

INDUSTRIALS:

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  Airbus (EADSY), Atos (AEXAY) - Airbus said to be interested in Atos' cybersecurity business. (CNA)


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  Canadian Pacific Railway (CP) - Will lock out its employees in 72 hours if there is no agreement with a union, a move that would potentially disrupt the movement of grain, potash and coal. (Reuters)


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  EU New Car Registrations fell -6.7% Y/Y in February (prev. -6.0%): Volkswagen (VWAGY) -11.5%, Stellantis (STLA) -19.5%. Renault (RNLSY) -4.0%, BMW (BMWYY) -1.5%, Mercedes Benz (MBG) +1.1%. (Newsquawk)


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  Steel Dynamics (STLD) - Rose 1.6% after hours after giving guidance for Q1. Sees Q1 EPS between USD 5.85-5.89 (exp. 5.09). Q1 profitability from steel operations is expected to be historically strong, but significantly lower than record seen in Q4 2021, driven by lower earnings from the company's flat roll steel operations, as average expected flat roll pricing is expected to decline by more than 10%, more than offsetting anticipated higher shipments and lower average scrap prices. Flat roll steel prices have recently firmed with extending lead-times and expectations for further improvements based on higher input costs and global flat roll steel supply disruptions, coupled with a continuing strong demand environment. The automotive, construction, and industrial sectors continue to lead steel demand. (STLD)


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  ThyssenKrupp (TKAMY) - Suspends FY22 forecasts due to present geopolitical and economic turmoil; still expects adj. EBIT in Q2 to increase Q/Q. Says statement on feasibility of spinning off steel business not possible in current conditions. (Newsquawk)


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  WD-40 Company (WDFC) - CEO Garry Ridge will retire in August as part of a planned leadership transition; Steve Brass, who has served as president and COO since 2019, appointed new CEO effective September. (WDFC)

MATERIALS:

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  Glencore (GLNCY) - To sell CSA copper mine for USD 1.1bln. (AFR)

HEALTH CARE:

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  Abbvie (ABBV) - RINVOQ receives FDA Approval for the treatment of adults with moderately to severely active ulcerative colitis. (ABBV)


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  AstraZeneca (AZN) - Reaches settlement agreement resolving patent litigation related to Ultomiris. (AZN)


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  Roche (RHHBY) - Roche provides molecular testing solutions to identify and differentiate SARS-CoV-2 Omicron variants of concern. (Newsquawk)

17 Mar 2022 - 09:30- EquitiesResearch Sheet- Source: Newsquawk