Weekly Market Update: Specter of Russian invasion continues to loom over markets
2022-02-18T16:16:06.24
Trading this week was mired by headlines surrounding a mounting crisis on the Ukraine border. Risk appetite swung from on to off on several occasions depending on what was being reported. Sentiment would improve when both sides would allude to further diplomacy, only to about-face when Western leaders would repeat an invasion was still likely imminent, while separate Russian press reports of flare ups in Eastern Ukraine were viewed by Western officials as a potential pretext for Russian action. The US Secretary of State and Russian Foreign Minister agreed to meet late next week, but the situation remained tenuous heading into a weekend where both the Olympics and joint Russian/Belarus military drills are set to come to a close. Early in the week the price of crude oil surged on worries that war between Ukraine and Russia could prolong elevated inflation in developed economies by disrupting supplies of important commodities. Late in the week oil prices backed off on growing speculation that Iran and Western powers are nearing a nuclear accord that could bring Iranian barrels back onto the market.
Wednesday’s FOMC minutes reminded investors that officials at their January meeting discussed an accelerated timetable for raising interest rates amid greater discomfort with high inflation. Regardless investors appeared to lean dovish by default because the minutes did little to communicate the minority argument for a 50bps move that has been presented since the release of January CPI figures. Fed speak also moderated a bit as officials other than Bullard offered a bit more moderate view on frontloading rate hikes, while unanimously signaling they remained on board for a March liftoff. Futures markets saw the odds of a 50 bps hike shrink back below 50% while safe haven flows kept an underlying bid in US Treasury markets. Growth stocks continued to struggle with several high profile swoons seen in highly trafficked technology names after their earnings reports. For the week, the S&P lost 1.6%, the DJIA dropped 1.9%, and the Nasdaq fell 1.8%.
In corporate news this week, Deere raised its guidance after a strong Q1 and said it expects demand for farm and construction equipment to continue benefiting from strong fundamentals. Marriott reported above consensus on its top and bottom line, noting new bookings across customer segments have rebounded to pre-Omicron levels. AirBNB posted a beat on earnings and guidance, as the lodging company saw its third consecutive quarter of double-digit booking increases.
Intel agreed to acquire Tower Semiconductor in a $6B deal as the tech giants continues its effort to expand its manufacturing capacity. Monster Beverage and Constellation Brands were said to be near an $85B merger that could dramatically revamp the beverage landscape. PE firm Madison Dearborn said it would buy MoneyGram for $1.8B in all-cash deal. Blackstone announced a €21B recapitalization of its pan-European last mile logistics firm Mileway, with the large majority of capital for the move coming from existing investors. GM said it would resume production of Bolt EV and EUV models at its Orion Township facility in April.
SUN 2/13
JGB (JP) Bank of Japan (BOJ): There were no takers in 5-10-year JGB Fixed-Rate buying operation
(CA) Ambassador Bridge has been fully reopened after police clear out protests - press
MON 2/14
(RU) Belarus Pres Lukashenko: Nobody plans to fight Ukraine
(RU) Russia reportedly continues to analyse US and NATO positions on security proposals; To continue a dialogue - Russian press
(RU) Russia govt spokesperson Peskov: President Putin to meet his Foreign and Defense Ministers on Monday (Feb 14th)
(US) Fed's George (FOMC voter, hawk): No need for Fed to raise rates outside of scheduled meetings
(RU) Russia Foreign Min Lavrov: Can see a way forward for talks with US and NATO; Will propose continuing our diplomatic work
DFS Reportedly to partner with Buy It Mobility Networks to allow consumers to pay directly from checking accounts without cards - press
TUES 2/15
(CN) China President Xi said to write that China will strengthen its legislation related to national security, to further improve anti-foreign sanction laws
BX Announces €21B recapitalization of pan-European last mile logistics firm Mileway; “Go-shop” process to commence immediately
(RU) Russian forces said to be conducting military drills across almost all military districts and fleets; Some drills said to be concluded - Russian press
(RU) Russia Central Bank (CBR) said to begin testing of the digital ruble; CBR and Finance Ministry failed to reach an agreement on crypto - press
TSEM Confirms to be acquired by Intel for $53/shr in ~$5.4B all-cash deal; Deal expected to be immediately accretive to Intel’s non-GAAP EPS
2330.TW Said to increase planned investment in Japanese plant to ~$8.7B (prior $7B) as Denso joined TSMC/Sony project - Nikkei
*(EU) EURO ZONE Q4 PRELIMINARY GDP Q/Q: 0.3% V 0.3%E; Y/Y: 4.6% V 4.6%E
(DE) GERMANY FEB ZEW CURRENT SITUATION SURVEY: -8.1 V -6.5E V -10.2 PRIOR; EXPECTATIONS SURVEY: 54.3 V 55.0E
MAR Reports Q4 $1.30 v $1.02e, Rev $4.45B v $3.86Be; Notes new bookings across customer segments have rebounded to pre-Omicron levels
(RU) Russian forces reportedly plan drills with hypersonic missiles in the Mediterranean Sea - Russian press
*(US) FEB EMPIRE MANUFACTURING: 3.1 V 12.0E
*(US) JAN PPI FINAL DEMAND M/M: 1.0% V 0.5%E; Y/Y: 9.7% V 9.1%E
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: +4.2% v +4.1% prior
(US) Trucks reportedly now leave Alberta town and end US-Canada border blockage - press
(EU) ECB's Villeroy (France): Guidance should have a shorter horizon amid uncertainties
(US) Pres Biden: US will be prepared no matter what happens in Ukraine; US remains ready to engage in diplomacy with Russia; Will respond decisively to Russian invasion
ABNB Reports Q4 $0.08 v $0.05e, Rev $1.54B v $1.46Be; Impact of Omicron has quickly dissipated
WEDS 2/16
HEIA.NL CEO: I’ve never seen inflation like it, not even close; Across the board we are faced with crazy increases - post earnings comments
*(UK) JAN CPI M/M: -0.1% V -0.2%E; Y/Y: 5.5% V 5.4%E (6th month above target and highest annual pace since Mar 1992)
(RU) Russia govt spokesperson Peskov: Remain committed to Minsk peace agreements as the solution for Donbas; NATO claims that no Russia troop pullback yet are wrong
SHOP Reports Q4 $1.36 v $1.33e, Rev $1.38B v $1.34Be; To consolidate fulfillment network to larger facilitates, to operate more fulfillment centers themselves
(LT) ECB's Kazaks (Latvia, hawk): Interest rate hike is quite likely this year; March meeting is unlikely to offer policy blueprint
GOOGL Reportedly plans to adopt new privacy restrictions to curtail tracking across apps on Android smartphones - US financial press
*(US) JAN ADVANCE RETAIL SALES M/M: 3.8% V 2.0%E; RETAIL SALES (EX-AUTO) M/M: 3.3% V 0.9%E
(US) Sec of State Blinken: We see no evidence of a Russia pullback from Ukraine border; We continue to see units moving towards the border, not away from it
*(US) JAN INDUSTRIAL PRODUCTION M/M: 1.4% V 0.5%E; CAPACITY UTILIZATION: 77.6% V 76.8%E
DIS Launches new business to develop residential communities called 'Storyliving'
*(US) FEB NAHB HOUSING MARKET INDEX: 82 V 82E
(US) Fed’s Harker (voter): Wants 25bps in March hike not 50bps
(US) Association of American Railroads weekly rail traffic report for week ending Feb 12th: 504.5K total units, +5% y/y
(US) Atlanta Fed GDPNow: raises Q1 GDP forecast to 1.5% from 0.7%
(US) TREASURY $19B 20-YEAR BOND AUCTION DRAWS 2.396% v 2.065% prior, BID-TO-COVER 2.44 v 2.34 PRIOR AND 2.29 OVER LAST 4 AUCTIONS
NVDA Reports Q4 $1.32 v $1.22e, Rev $7.64B v $7.43Be; Guides Q1 very strong; Expects to announce many new products, applications and partners for NVIDIA computing
(UR) Ukraine forces said to have fired on Luhansk People’s Republic (Russian backed separatists) in several places with mortars, according to the separatists - press
THURS 2/17
AIR.FR Reports FY21 adj Net +€4.21B v -€1.13B y/y, Adj EBIT €4.87B v €1.71B y/y, Rev €52.1B v €49.4B y/y; raises 2021 dividend to €1.50/share v nil y/y
NESN.CH Reports FY21 (CHF) Net 16.9B v 12.3Be, Op 15.1B v 14.9B y/y, Rev 87.1B v 86.9Be; Confirms to buy back CHF10B in shares in 2022
KER.FR Reports FY21 Net €3.18B v €2.15B y/y, EBITDA €6.47B v €4.57B y/y, Rev €17.6B v €13.1B y/y; Sees momentum to continue in 2022
(UR) Ukrainian military official: Russian occupying forces fired on village in Luhansk region; No injuries were caused - press
(RU) Russia govt spokesperson Peskov: Situation in Donbas region is getting more tense; NATO waging information aggression
WMT Reports Q4 $1.53 v $1.50e, Rev $152.9B v $151.4Be; Announces share buyback of at least $10B in FY23 (2.7% of market cap); Notes navigated higher supply chain costs well
(RU) US envoy to UN Thomas-Greenfield: Evidence on the ground is that Russia is moving towards an 'imminent invasion'; This is a crucial moment
MU Reportedly notified customers that NAND flash chip contract prices to rise 17-18% v 15%e, as spot prices rose 25% - Taiwanese price
*(US) INITIAL JOBLESS CLAIMS: 248K V 218KE; CONTINUING CLAIMS: 1.593M V 1.60ME
*(US) JAN HOUSING STARTS: 1.638M V 1.695ME; BUILDING PERMITS: 1.9M V 1.750ME
*(US) FEB PHILADELPHIA FED BUSINESS OUTLOOK: 16.0 V 20.0E
(US) Pres Biden: There is reason to believe Russia is involved in false flag operations; Probability of Russian invasion is very high
(US) Pres Biden reportedly to issue executive order on regulating crypto next week - Yahoo Finance
(RU) US said to accept holding talks with Russia Foreign Minister Lavrov late next week [specific day not disclosed] - US financial press
FRI 2/18
ENI.IT Reports Q4 adj Net €2.11B v €1.91Be, adj Op €3.81B v €3.55Be, Rev €26.8B v €11.9B y/y
(RU) Russia to conduct strategic deterrence drills on Sat, Feb 19th; President Putin to monitor - Russian press
(RU) Russia govt spokesperson Peskov: Breaches of cease-fire arrangement in Donbas is potentially very dangerous
DE Reports Q1 $2.92 v $2.28e, Rev (equipment ops) $8.53B v $8.09Be
OPEC+ reportedly would seek to bring Iran into oil supply agreement bringing 1.3M bpd onto market if nuclear deal is reached - financial press
(RU) Donbas separatists leader Pushilin announces evacuation of Eastern Ukraine residents to Russia; To commence as soon as today
(DE) Germany Foreign Min Baerbock: Germany is ready to pay high economic price for unprecedented sanctions on Russia
(US) JAN EXISTING HOME SALES: 6.50M V 6.10ME
F Said to have previously considered spinning off EV and or traditional business – press
GE Discloses supply chain headwinds may continue to partially mask the company's 'significant progress' across its businesses; May 'pressure' growth, profit and FCF through Q1 and H1 - investor letter
(EU) ECB officials reportedly are 'edging toward' rate hike in 2022 to address inflation – press
(US) Fed's Williams (FOMC voter): Does not see compelling argument for a big first rate increase - Q&A with reporters
(US) Weekly Baker Hughes Rig Count: 645 v 635 w/w (+1.6% w/w) (Rises for 8th straight week in a row)
