MARKET WRAPS
Stocks:
European stocks were mixed as the tension in eastern Europe continues to weigh on the market mood.
Russian President Vladimir Putin said Tuesday that Moscow had withdrawn some troops from the Ukrainian border, but European and U.S. officials said they hadn't seen evidence of a significant drawdown. President Biden said an invasion remained "distinctly possible."
Separately, Ukraine's Ministry of Defense and Armed Forces websites and online services of two state-owned banks were disrupted by suspected cyberattacks.
"Risk appetite has recovered to an extent, with U.S. indices snapping a three-day losing streak yesterday," IG analysts said. "Signs of at least a small withdrawal of Russian troops helped lift sentiment, providing a boost for indices in Europe and the U.S., which carried over into the Asian session.
Comments from U.S. President Biden reflected the ongoing unease however, since significant Russian forces are still arrayed along the Ukrainian border," they added.
Shares on the move:
Ericsson shares traded 8.8% lower after the company said that a 2019 internal probe found "serious breaches of compliance rules" in Iraq between 2011 and 2019.
The investigation uncovered evidence of corruption, including using suppliers to make cash payments, funding inappropriate travel and expenses, and improper use of sales agents and consultants, Ericsson said.
It also identified payments to intermediaries and the use of alternate transport routes in connection with circumventing Iraqi Customs, at a time when terrorist organizations, including ISIS, controlled some transport routes.
Ericsson last week said it would review its 2019 probe after receiving questions from the media on the subject.
Vopak's 4Q was soft, with pressure on occupancy rates and its return on invested capital, Jefferies said.
The Dutch tank-storage company's Ebitda rose 3% on year to EU212.5 million, 2% ahead of consensus, but its EBIT of EUR121.9 million and EPS of 55 European cents missed market consensus by 4% and 20%, respectively, Jefferies said.
Vopak didn't provide any further guidance for 2022, and there was no update on the strategic review of Australian assets under new Chief Executive Dick Richelle either, Jefferies said.
The U.S. bank retains its buy rating and price target of EUR42.0 on Vopak's stock. Shares were down 5.1% at EUR29.91.
Stocks to watch:
Air Liquide's solid growth momentum from previous quarters continued into 4Q, Citi said. The French industrial-gases company posted comparable growth in the quarter of 7.2%, ahead of consensus, Citi said.
Despite fading benefits from its healthcare business as the pandemic's intensity subsides, the company saw strong underlying growth in most of its segments, including a good recovery in its industrial merchant unit of 9% comparable revenue growth the U.S. Bank said.
Air Liquide's shares should be driven by stable growth, continuing benefits of pricing power, and attractive valuation, given the growth options on renewable hydrogen, Citi added. It keeps its buy rating on the stock and EUR158 target price. Shares rose 2.8% to EUR148.60
Heineken's guidance for stable to modest growth in margins is slightly below consensus expectations, but not so disappointing, RBC Capital Markets said.
The Canadian bank said the results were positive, beating expectations in the second half, and that the Dutch brewer expects Asia performance to bounce back in 2022 from pandemic-related restrictions while Europe will take longer.
However, RBC doesn't expect Heineken to reach a 17% EBIT margin by 2023 as the company had guided in its full-year results. RBC has an underperform rating on the stock and a price target of EUR69.
Delivery Hero is in need of refinancing and may have to implement a capital raise, Deutsche Bank analysts said, cutting their recommendation on the stock to hold from buy.
There is limited visibility on refinancing the German delivery company's convertible bonds, so an equity raise is a risk, Deutsche said, factoring the dilution from a potential capital increase into its new target price of EUR80, down from EUR140.
Delivery Hero's growth momentum is slowing, and its business is still loss-making, the German bank said. Deutsche said securing a revolving facility could be better for Delivery Hero than trimming its portfolio or raising equity.
Bayer is finding itself with a positive risk-reward balance around its glyphosate litigation, Citi said.
According to the bank, while it is highly likely that the Solicitor General will recommend the Supreme Court hear an appeal on a prominent case around the allegedly carcinogenic substance, there is only a 30% probability that the case is actually taken.
A decision on the case--where a consumer named Edwin Hardeman claimed that his lymphoma was caused by Bayer's Roundup weedkiller--is unlikely until early 2023, Citi said.
In any case, the German company's additional provisions and plan implementation on the issue leave little downside risk, the bank said. Bayer traded up 0.1% to EUR53.96.
Data in focus:
The rate of inflation in the U.K. quickened in January, holding at a three-decade high, read what economists are saying here [https://newsplus.wsj.com/search/realtime/topic/?searchParts=[{%22t%22:%22djn_code%22,%22q%22:%22djn:S/UKCI%22,%22c%22:%22S/UKCI%22,%22n%22:%22UK%20CPI%22}, {%22t%22:%22operator%22,%22q%22:%22and%22,%22n%22:%22and%22}, {%22t%22:%22djn_code%22,%22q%22:%22djn:N/ALMT%22,%22c%22:%22N/ALMT%22,%22n%22:%22All%20Market%20Talk%22}]&searchFilterState=open&includeDefaultFilter=true].
Fourth-quarter GDP for Norway showed the economy expanded by 1.4% on the quarter, versus the 1.3% that consensus and Norges Bank had expected, Handelsbanken said.
"All told, the activity level by year-end 2021 was about 0.3% higher than assumed by Norges Bank," it said.
Handelsbanken adds that updated labor-market data show that the economy has performed much better than Norges Bank had anticipated for January, so the present state of the economy is significantly stronger than assumed by the central bank.
In addition, society has been reopened and the growth outlook remains bright, it added. "This again underlines the upside risk to the rate path ahead," the Swedish bank said. Handelsbanken maintains its call for four hikes this year versus Norges Bank's signals of three hikes.
U.S. Markets:
Stock futures edged lower as investors awaited minutes from the Federal Reserve's January meeting.
Investors are awaiting minutes from the Fed's January meeting, due at 2 p.m. ET, for insight on the debate over the path for rate raises. Last month, U.S. inflation accelerated to a 7.5% annual rate, another four-decade high, increasing expectations that the Fed may have to increase rates faster and more aggressively.
"You've got this backdrop of inflation, lack of confidence in central banks in being ahead of the curve, a non-orderly recovery in the global economy and supply lines and consumer demand and all that coming together is creating volatility," said David Coombs, London-based head of multiasset investments at Rathbone Investment Management. Potential escalation between Russia and Ukraine is "the cherry on the top," he added.
The threat is shaking up a fragile global oil market, which will likely add to inflationary pressures, Mr. Coombs said.
Earnings are due ahead of the U.S. market open from Kraft Heinz. Companies including Cisco Systems, American International Group and Nvidia are slated to post earnings after markets close.
Economists surveyed by The Wall Street Journal expect that retail sales data, due out at 8:30 a.m., will show a rebound in January, led by rising auto purchases and online orders.
Forex:
The dollar may continue to fall as the prospect of a diplomatic solution to the Ukraine crisis with Russia drives investors away from safe havens but declines will be limited, ING said.
Expectations that the Fed could raise interest rates at a rapid pace should cap the dollar's losses, ING analysts said in a note.
"Markets will scan the minutes of the January FOMC meeting today to see how much support there was around a fast start in the tightening cycle," they said.
Sterling stayed higher after data showed inflation accelerated in January to the highest rate in 30 years, fuelling expectations the Bank of England will raise interest rates further.
Consumer prices rose 5.5% on year in January after a 5.4% rise in December, above the BOE's 2% target and the 5.4% rise expected by economists in a WSJ survey. "This new high in inflation will put further pressure on the Bank of England to continue to raise interest rates," Premier Miton Monthly Income Fund said in a note.
Bonds:
In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 2.047% from 2.044% Tuesday.
The gap between 10-year German and Swiss government bond yields is likely to re-emerge by the end of next year, reflecting a faster withdrawal of policy support by the ECB than by the SNB, an economist at Capital Economics said.
During the 2010s, the 10-year German Bund yield was typically higher than the equivalent Swiss bond yield, but the gap had all but disappeared by the time the pandemic emerged, they added.
One possible reason why a gap in yields has not re-emerged is the turmoil in risky asset markets so far this year ," the economist said, adding that German Bunds might have benefited more than Swiss bonds from safe-haven flows.
The ECB ramped up purchases of euro investment-grade corporate bonds in the week ending Feb. 11., UniCredit said, citing official data. Net purchases of corporate bonds in the week ending Feb. 11 totalled EUR 1.516 billion, up from EUR1.229 billion in the previous week.
The central bank added one environmental, social and governance bond among the three new bonds it purchased in the last reporting week, analysts at the bank said.
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02-16-22 0639ET
