Early Morning Call: Jerome Powell warns inflation fight will take "quite a bit of time"

Equity market overview

It was a mixed session overnight in the Asia-Pacific region, after gains for US indices yesterday.

In Europe, equity markets opened higher, the FTSE 100 having set a new record high earlier this morning on the IG 24-hour market.

Fed

Federal Reserve (Fed) chair, Jerome Powell, acknowledged yesterday before the Economic Club of Washington that interest rates may need to move higher than expected. He refused to say that the 517,000 jobs created last month would necessarily force the Fed's benchmark interest rate higher than the 5% to 5.25% range currently anticipated but admitted he didn't expect it to be this strong.

Powell said policymakers were open to shocks in either direction - ready to approve even tighter monetary policy if continued strong job gains lead to higher wages and prices.

Earnings

Barratt Developments, Britain's largest house builder, flagged persisting market uncertainty as high mortgage rates weigh on demand. The group posted a half-year (H1) pretax profit of £501.5 million, compared with £432.6m.

TotalEnergies posted a record adjusted net profit of $36.2 billion in 2022, double the level of a year earlier. TotalEnergies' fourth quarter (Q4) adjusted net income was $7.6bn. A year earlier, the group posted a net income of $6.8bn.

The company said it would propose a dividend of €2.81 per share, up 6.4% from a year earlier and on top of an already announced €1 per share special payout.

Société Générale posted a higher-than-expected profit in the fourth quarter, driven by the strong performance of its corporate and investment banking division. The third largest French bank reported net income of €1.16bn, beating analyst's consensus of €834m. This was, however, 35% lower than the same period a year ago, as the bank's hiked provisions for failing loans was up fivefold to €413m.

Volkswagen pushed out its preliminary figures for the year. It said that its full-year (FY) adjusted operating profit was €22.5bn, missing analysts' expectations of €22.96bn. The German automaker generated a net cash flow of around €5 billion in fiscal 2022, falling short of its self-imposed target of achieving net cash flow at the level of the previous year of €8.6 billion.

The company said the shortfall was due mainly to an unstable supply chain throughout the year and disruptions in the logistics chains, particularly at the end of 2022. As a result, working capital and in particular inventories of finished goods, raw materials and supplies at the end of the year were significantly higher than expected.

Current planning for 2023 suggests that this year-end 2022 increase in working capital will largely reverse during the year.

In the US, Walt Disney is scheduled to post quarterly earnings tonight after the US closing bell. The upcoming results that will mark the return of Bob Iger at the helm. On November 20, Iger was called back by the Disney board, following the immediate dismissal of Bob Chapek.

Analysts expect earnings of 79 cents per share on revenue of $23.43bn. Subscription numbers for Disney+, Hulu and ESPN+ will again be in focus.

The group's parks and recreation services had a phenomenal return to growth in 2022, and markets will be looking to see whether the group managed to keep the momentum going.

Uber Technologies is also set to report tonight after market close. In the third quarter (Q3) of 2022, Uber recorded a net loss of $1.2 billion, $512 million of which was attributed to revaluations of Uber's equity investments. However, the company beat analysts' estimates for revenue, which grew by 72% year-over-year (YoY), and reported that adjusted EBITA exceeded its guidance of $440 - $470m. As for the fourth quarter, the market expects a loss per share of 18 cents and revenue of $8.4bln.

The market will also be closely looking for the number of monthly active users, the number of trips, and the number of customers who have subscribed to Uber One.