Morning: Risk-off disposition as geopolitical tension rises

The S&P 500 futures trade 32 points, or 0.7%, below fair value as the market digests more worrisome geopolitical headlines in front of the Employment Situation report for February at 8:30 a.m. ET.

Russia seized the Zaporizhzhia nuclear power complex in Ukraine last night, starting a fire in the largest nuclear power station in Europe in the process. Fortunately, the fire was extinguished with no material damage inflicted, but the increased threat of a nuclear conflict has raised the stakes for all sides.

Commodities are higher once again with oil prices hovering above $110 per barrel ($110.38, +2.71, +2.5%), while Treasury yields have slipped amid increased efforts to shelter from the geopolitical risks.

The 2-yr yield is down five basis points to 1.49%, and the 10-yr yield is down six basis points to 1.78%. The U.S. Dollar Index is up 0.6% to 98.39.

As for the employment report, the Briefing.com consensus projects 400,000 additions to nonfarm payrolls, a 3.9% unemployment rate (versus 4.0% in January), and a 0.5% increase in average hourly earnings. Overall, the report is expected to be decent.

Separately, Broadcom ( AVGO 595.50, +16.90, +2.9%) and Gap ( GPS 15.20, +0.95, +6.7%) are bucking the negative disposition in pre-market action after both companies topped earnings expectations and issued upbeat guidance.

In U.S. Corporate news:

  • Broadcom (AVGO 595.50, +16.90): +2.9% after beating top and bottom-line estimates and guiding fiscal Q2 revenue above consensus.
  • Costco (COST 523.50, -9.55): -1.8% despite beating top and bottom-line estimates. On a related note, Telsey Advisory Group raised its COST price target to $615 from $610.
  • Gap (GPS 15.20, +0.95): +6.7% after beating EPS estimates and guiding FY23 EPS above consensus.
  • Marvell (MRVL 63.37, -1.83): -2.8% despite beating top and bottom-line estimates and guiding Q1 revenue mostly above consensus. On a related note, MRVL was downgraded to Hold from Buy at Summit Insights.

Reviewing overnight developments:

  • Equity indices in the Asia-Pacific region ended the week on a lower note. Japan’s Nikkei: -2.2% (-1.9% for the week) Hong Kong’s Hang Seng: -2.5% (-3.8% for the week) China’s Shanghai Composite: -1.0% (-0.1% for the week) India’s Sensex: -1.4% (-2.7% for the week) South Korea’s Kospi: -1.2% (+1.4% for the week) Australia’s ASX All Ordinaries: -0.7% (+1.7% for the week).

    • In economic data:
      • Japan’s January Unemployment Rate 2.8% (expected 2.7%; last 2.7%)
      • South Korea’s February CPI 0.6% m/m (expected 0.4%; last 0.6%); 3.7% yr/yr (expected 3.5%; last 3.6%)
      • India’s February Nikkei Services PMI 51.8 (expected 53.0; last 51.5)
      • Australia’s January Retail Sales 1.8% m/m, as expected (last -4.4%)
      • Singapore’s January Retail Sales -2.5% m/m (last 1.3%); 11.8% yr/yr (last 6.7%)
      • Hong Kong’s January Retail Sales 4.1% yr/yr (last 6.2%)
    • In news:
      • Investor sentiment was pressured after reports of overnight fighting and a fire at an administrative building of a nuclear power plant in Southeast Ukraine. The fire was extinguished, and reactors were not affected, according to the IAEA Director General.
      • Japan increased its subsidy ceiling for fuel wholesales.
      • South Korea’s February CPI remained above the 2.0% target for the 11th consecutive month.
      • China’s National People’s Congress will convene tomorrow and continue through March 11.
  • Major European indices trade on a sharply lower note to end a volatile week. STOXX Europe 600: -3.0% (-6.5% week-to-date) Germany’s DAX: -3.7% (-9.4% week-to-date) U.K.'s FTSE 100: -3.5% (-6.7% week-to-date) France’s CAC 40: -3.7% (-9.1% week-to-date) Italy’s FTSE MIB: -4.9% (-11.6% week-to-date) Spain’s IBEX 35: -3.2% (-8.6% week-to-date).

    • In economic data:
      • Eurozone’s January Retail Sales 0.2% m/m (expected 1.5%; last -2.7%); 7.8% yr/yr (expected 9.5%; last 2.1%)
      • Germany’s February IHS Markit Construction PMI 54.9 (last 54.4). January trade surplus EUR9.40 bln (expected surplus of EUR7.10 bln; last surplus of EUR8.1 bln). January Imports -4.2% m/m (last 4.0%) and Exports -2.8% m/m (last 1.2%)
      • U.K.'s February Construction PMI 59.1 (expected 54.3; last 56.3)
      • France’s January Industrial Production 1.6% m/m (expected 0.5%; last -0.1%)
      • Italy’s Q4 GDP 0.6% qtr/qtr, as expected (last 2.6%); 6.2% yr/yr (expected 6.4%; last 3.9%)
    • In news:
      • There were reports of overnight fighting and a fire at an administrative building of a nuclear power plant in Southeast Ukraine. The fire was extinguished, and reactors were not affected, according to the IAEA Director General.
      • European Central Bank policymaker Rehn said that the medium-term inflation outlook is being assessed carefully and that the central bank will do whatever is necessary.
      • A British envoy said that a nuclear deal with Iran is possible, but not guaranteed.

U.S. equity futures:

  • S&P 500 Futures: -40 @ 4,323
  • DJIA Futures: -330 @ 33,465
  • Nasdaq 100 Futures: -110 @ 13,924

Overseas:

  • Europe: DAX -3.7%, FTSE -3.5%, CAC -3.7%
  • Asia: Nikkei -2.2%, Hang Seng -2.5%, Shanghai Composite -1.0%

Commodities:

  • Crude Oil +2.67 @ 110.34
  • Nat Gas +0.14 @ 4.88
  • Gold +15.50 @ 1951.40
  • Silver +0.15 @ 25.36
  • Copper +0.04 @ 4.82