US EARLY MORNING: US index futures are slumping towards YTD lows

US equity futures are lower by 1.1-1.4% (YM -1.1%, RTY -1.3%, ES -1.3%, NQ -1.4%), taking stocks back to the low-end of the 2022 range. Global equities have started the week in a defensive fashion, with continued concerns surrounding global growth being exacerbated by a hawkish monetary policy impulse. Friday's jobs data topped expectations, and didn’t provide anything to suggest that the Fed will deviate from its course of aggressive tightening. Strategists at Morgan Stanley continue to argue the bearish thesis, and are looking for a substantial further selloff in US equities, despite its base case that a recession can be avoided (globally, MS sees scope for China GDP to rebound later, says Europe's embargo on Russian oil is manageable, and thinks that the Fed will reverse course at the first sign that it is doing too much). Meanwhile, JPMorgan's strategists–who have been bullish in recent months–have been telling their clients that Fed hawkishness might be peaking, and policy should become less problematic for equities. JPM notes that the spread between inflation break-evens and bond yields is narrowing and may therefore limit expectations of further hawkishness; this could help growth stocks, and JPM recommends investors remain overweight value vs growth. But the bank says it is not looking for a big decline in growth names, and stability here should underpin the broader market, while it says that a less aggressive Fed could also improve the prospects for EM equities. More immediately, the data docket for Monday is thin: Employment Trends data for April and remarks from Fed’s Bostic are the highlights. Our 'Day Ahead' calendar can be accessed here. For the week ahead, US CPI is the main event; our week ahead briefing can be accessed here. 

KEY EQUITY LEVELS (via Credit Suisse):

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  SPX: 4026/21, 4034/33, 4063/57, 4080, 4106, 4174/75, 4199, 4255, 4270, 4282.


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  NDX: 12208, 12299, 12592, 12628, 12710, 12948/82, 13345, 13542/56, 13607, 13690.


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  RUT: 1805, 1817/13, 1825, 1839/36, 1849, 1879, 1895/96, 1926/30, 1936, 1953/54.

COVID:

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  White House stepping up warnings about a COVID surge this autumn and winter, is making contingency plans for how it will provide vaccines to Americans if Congress does not allocate more money for the COVID-19 response, NYT reports.


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  NYC's subways have regained ridership levels seen before the Omicron wave in December, Bloomberg reported.

CHINA:

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  US-listed China Names - US and China regulators are in talks to settle a long-running dispute over the auditing compliance of US-listed Chinese firms, Reuters reported citing sources.


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  Shanghai tightens lockdown to hit zero-COVID goal by late May, Reuters reported. Ahead of Communist Party congress, China Premier Li warned that the employment outlook was complicated and grim, and local authorities needed to focus on job stability.


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  Tesla (TSLA), Taiwan Semiconductor Manufacturing International Corp (TSM) - About 2,000 manufacturers in Shanghai are likely to obtain fresh funds from banks to help speed up business reopening as the mainland's financial capital edges closer to putting the latest Covid-19 outbreak under control, SCMP reported. PBOC asked commercial lenders to grant easy credit to so-called "white-listed" companies, including car producer Tesla and chip maker Semiconductor Manufacturing International Corp, to reinforce their operations, after reeling under 37 days of citywide lockdown.

GEOPOLITICS:

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  Russian Energy - EU officials proposed a ban on insuring ships that carry Russian oil, a move aimed at blocking Russia’s access to global oil markets and the revenue that has fuelled its military invasion of Ukraine, WSJ reported. Separately, Gazprom reassured European clients that they can keep paying for gas without breaching sanctions, the latest indication that Russia may be trying to find a way to keep the gas flowing, Bloomberg reported.


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  Iran Nuke Deal - EU is making a last-ditch attempt to save the Iran nuclear deal and break a deadlock triggered by Tehran’s demand that Washington lift its terrorist designation on the Revolutionary Guards, FT reported. EU seeking a "middle way" to end the impasse, and in return, Iran would drastically reduce its nuclear activity.


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  North Korea - The pariah state tested a submarine-launched missile on Saturday, which could extend the range of the North’s nuclear arsenal, NYT reported; US warns that NK might soon test a nuclear device.

ENERGY:

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  Saudi OSPs - Saudi Arabia cut oil prices for buyers in Asia as coronavirus lockdowns in China weigh on demand, countering uncertainty around Russia’s supplies as the Ukraine war drags on, Bloomberg reported.


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  Big Oil - Big oil companies are returning money to shareholders, not investing in new production, setting the world up for an even tighter energy market in the years ahead, Bloomberg reported.


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  BP (BP), Shell (SHEL) - Positive mention in Barron's; newspaper said investors that do not mind risk should consider buying, as both are well-run companies investing heavily in alternative energy.


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  Glencore (GLNCY), Shell (SHEL) - Activist Third Point has initiated a long position in Glencore in Q1, also continued to add to its Shell long position.


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  Repsol (REPYY), Pieridae Energy (PEA) - Canada in talks with the companies to see how it can speed up projects in New Brunswick and Nova Scotia to help boost supply to Europe, Reuters reported.

AGS:

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  Wheat - India has downplayed concerns over wheat export levels amid a heat wave threatening yields, Nikkei reported; Delhi says it won't curb shipments amid supply disruptions caused by Ukraine war.

MATERIALS:

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  BHP (BHP) - Exec said that while lithium mining was within its skillset, BHP prefers large, long-life and scalable projects in commodities with differentiated cost curves, Bloomberg reported.

INDUSTRIALS:

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  Rivian Automotive (RIVN), Ford Motor (F), JPMorgan (JPM) - Ford is selling 8mln Rivian shares as the insider lockup for the stock expires on Sunday, sources told CNBC. JPMorgan also plans to sell a block of 13-15mln shares for an unknown seller, CNBC said.


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  Autos - The Manheim Used Vehicle Value Index declined 1% M/M in April, CNBC reported; wholesale vehicle prices have -6.4% since the January record; prices still high, and the index remains +14% Y/Y.


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  Tesla (TSLA), Uber Technologies (UBER), Grab Holdings (GRAB), Genuine Parts (GPC), O'Reilly (ORLY), Monro (MNRO), Universal Technical Institute (UTI), Snap-On (SNA) - Positive mention in Barron's; newspaper said identified these stocks as eight names to play the future of transportation.


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  General Motors Company (GM) - Positive mention in Barron's; newspaper said the stock was a buy; GM has big ambitions and the stock is cheap stock. But the pace of its electric-car launches must catch up.


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  Toyota Motor Corporation (TM) - Cautious mention in Barron's; newspaper said it is trying to catch up in the crowded EV race, and it may be too late.


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  Defense Names - US is pushing Taiwan to order missiles and smaller arms for asymmetric warfare has gained urgency since Russia’s invasion of Ukraine, NYT reports.


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  Lockheed Martin Corporation (LMT) - Plans to nearly double production of the antitank Javelin missiles to 4,000 units annually.


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  Hochtief (HOCFY) - Q1 sales were up, EBITDA topped expectations, but left guidance unchanged. Q1 revenue EUR 5.3bln, EBITDA EUR 268mln (exp. 265mln), net income EUR 118mln.

CONSUMER CYCLICAL:

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  Amazon (AMZN) - Amazon has fired senior managers tied to unionised warehouse in Staten Island; the dismissals occurred outside the company's typical employee review cycle, were seen by the managers and other people who work at the facility as a response to the victory by the Amazon Labor Union, NYT reported.


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  Amazon (AMZN) - NLRB determined that Amazon violated federal labour law by holding mandatory anti-union meetings at a warehouse where workers were weighing whether to unionise, Axios reports.


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  Starbucks Corporation (SBUX) - Starbucks has requested a meeting with the Biden administration after unionised workers talked to White House officials. The newswire separately reported that an NLRB official issued a complaint alleging misconduct by Starbucks toward union members; Starbucks said the allegations were false and lacked merit.


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  Booking Holdings Inc. (BKNG) - Positive mention in Barron's; newspaper said travel stocks hadn't recovered yet, and BKNG is a opportunity to play improved travel environment.


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  Fortune Brands Home & Security (FBHS) - Positive mention in Barron's; newspaper said it's remodeling itself by spinning off its largest division into a stand-alone company that could draw in new investors and make the stock sparkle.

TECH:

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  Microsoft Corporation (MSFT) - Microsoft preparing to expand access for 'Xbox Everywhere' game streaming service through TVs, according to Venture Beat.


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  Uber Technologies (UBER) - Uber is to cut spending on marketing and incentives, and treat hiring as a "privilege," its CEO said to staff, according to CNBC; Uber will now focus on achieving profitability on a FCF basis rather than adj. EBITDA, CNBC said.


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  Infineon (IFNNY) - Raised outlook after better-than-expected results. Q2 revenue EUR 3.29bln (exp. 3.21bln), adj. EPS EUR 0.44 (prev. 0.41), net income EUR 469mln. FY22 guidance has been upgraded again, to EUR 13.5bln +/- EUR 500mln (prev. 12.5-13.5bln). CEO said demand for its products continued to exceed supply significantly.

COMMUNICATIONS:

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  Twitter (TWTR) - Elon Musk has claimed he can increase Twitter's annual revenue to USD 26.4bln by 2028, up from USD 5bln last year, according to a pitch deck Musk presented to investors, NYT reports.


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  Twitter (TWTR) - A judge dismissed former President Trump's lawsuit against Twitter that challenged his suspension from the platform.


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  Rogers Communications Inc. (RCI), Shaw Communications Inc. (SJR) - Rogers said Canada's antitrust officials were opposed to its USD 16bln takeover of Shaw, casting doubt on whether the deal can close, Bloomberg reported.


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  Formula One Group (FWONA) - Positive mention in Barron's; newspaper said the recent pullback in the stock before the Miami Grand Prix could be a buying opportunity.

FINANCIALS:

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  Russia Exposure - Western banks are preparing for a USD 10bln hit on Russia projects as they pull out of the country because of its invasion of Ukraine, FT reports.

UTILITIES:

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  Southwest Gas Holdings, Inc. (SWX) - SWX promotes Karen Haller to CEO and president, replacing John Hester immediately, part of a settlement with activist investor Carl Icahn; Icahn will also get as many as four board seats.


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  EDF (ECIFY) - Has cautioned that a new nuclear reactor in Essex, UK is at risk of collapse, due to political opposition to the involvement of China General Nuclear.

HEALTH CARE:

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  Moderna Inc. (MRNA), Arbutus Biopharma (ABUS), Genevant Sciences - Moderna filed a motion to dismiss some of the patent-infringement claims in the lawsuit by Arbutus and Genevant, as it fends off rival companies' claims that its Covid-19 vaccine infringes their patents, WSJ reports.


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  Fresenius Medical (FMS) - US FDA is evaluating the potential risk of exposure to toxic compounds when using certain haemodialysis machines made by the company.

09 May 2022 - 09:29- EquitiesResearch Sheet- Source: Newsquawk