Morning Bid Americas: Tanking Tesla reports, Europe business beats

Pentair

23/04/2024 11:01

A look at the day ahead in U.S. and global markets from Mike
Dolan
World markets have cheered up a bit this week, but ailing
Tesla's  TSLA.O  tanking stock price faces a critical earnings
test later on Tuesday and this month's European business pulse
proved surprisingly racy.
    Relief at cooling Middle East tensions helped steady the
ship on Monday after the worst week on Wall Street since 2022 -
with bellwether chip giant Nvidia  NVDA.O  recouping some of
Friday's 10% lunge as Big Tech megacaps get set to report first
quarter updates over three days of a heavy earnings diary.
    First of the "Magnificent 7" vanguard stocks to report on
Tuesday is electric vehicle behemoth Tesla, which is down a
massive 43% for the year to date and off almost 60% over the
past two years amid a brutal price war, waning EV demand
worldwide and serial corporate governance and product questions.
    Tesla lost another 3% on Monday despite the wider Wall
Street rebound after it cut prices again in a number of its
major markets, including China and Germany, following price
reductions in the United States. It was little changed out of
hours ahead of Tuesday's bell.
    China's state planner expects an intensified price war among
automakers of electric cars and plug-in hybrids this year
because of overhanging supply and other issues, the government
body said in a statement on Monday.
    While Big Tech nerves are a feature of this month's shakeout
of the major stock indexes, investors will look to the upcoming
earnings for a clearer picture.
    Artificial intelligence darling Nvidia, which is still up
more than 50% for 2024, appeared to catch a bid on last week's
sizeable dip - with worsening geopolitics one factor influencing
the stock. 
    Chinese universities and research institutes recently
obtained high-end Nvidia AI chips through resellers despite the
U.S. widening a ban last year on the sale of such technology to
China, according to a Reuters review of tender documents.
    What is more, Apple's  AAPL.O  smartphone sales in China
declined by 19.1% in the first quarter of 2024, while rival
Huawei's  HWT.UL  grew by 69.1%, signaling an increasing threat
to the U.S. firm's dominance in the high-end segment of the
world's largest smartphone market. 
    Apple's China smartphone market share fell to 15.7% in the
fist three months, according to Counterpoint Research.
    More broadly, S&P500 futures held Monday's cash market
bounce back above the 5,000 round figure - with eyes now trained
on both the earnings season and increasing pessimism about the
chances for any Federal Reserve interest rate cut this year.
    As Fed officials are now in a blackout period before their
next May 1 policy decision, futures pricing has reduced 2024
easing expectations to less than 40 basis points for the first
time this year and now only sees an 80% chance of a quarter
point rate cut before the November election.
    With some $69 billion of two-year Treasuries coming under
the hammer later on Tuesday, two-year yields hovered just shy of
5.0%.
    Even in the face of more stern warnings from Japanese
government officials about potential yen-supporting
intervention, the dollar  JPY=  continued to set new 34-year
highs against the Japanese currency just under 155.
    The Bank of Japan will raise rates again if trend inflation
accelerates towards its 2% target as expected, BOJ governor
Kazuo Ueda said.
    Flash U.S. April business readings will color in the picture
further today, with Europe's equivalent surveys out already and
beating forecasts. German business, in particular, unexpectedly
returned to expansionary mode this month.
    That surprise gave the euro  EUR=  a lift - and knocked the
dollar's wider DXY  .DXY  index back a bit in the process - even
though money markets are still more than 50% priced for a
European Central Bank rate cut as soon as June.
    Despite a miss in the manufacturing sector, the overall
British business reading also beat forecasts and lifted sterling
 GBP=  off Monday's five-month lows.
    The combination of recent sterling weakness and rising Bank
of England rate cut hopes earlier saw Britain's blue-chip FTSE
100  .FTSE  hit a record high - even though it still lags U.S.
and European benchmarks this year and the domestically-focused
FTSE250  .FTMC  midcaps remain in the red for 2024.
    Elsewhere, China's mainland stocks  .CSI300  continued to
underperform worldwide - although Hong Kong  .HSI  gained again
on Tuesday amid optimism over proposed reforms aimed at boosting
the city's attractiveness to foreign investors.
    Delivery giant Meituan  3690.HK  and e-commerce firm JD.com
 9618.HK  led Tuesday's gains and rose 8% and 6% respectively.
    In Europe, a near 5% gain in Novartis  NOVN.S  stood out as
the Swiss drugmaker raised its full-year outlook.
    The wobbly tech sector got a boost from SAP's  SAPG.DE  4%
rise after the German company reported a 24% jump in
first-quarter cloud revenue.
    Back on Wall Street, the wait for Tesla's update will be
filled with updates from the likes of Texas Instruments, Visa,
UPS, General Motors, Lockheed Martin and Halliburton.

Key diary items that may provide direction to U.S. markets later
on Tuesday:
* Flash April business surveys from the United States and around
the world, U.S. March new home sales, Richmond Federal Reserve
April business surveys, Philadelphia Fed releases April service
sector survey
* US corporate earnings: Tesla, Texas Instruments, Visa, MSCI,
Invesco, Lockheed Martin, UPS, General Motors, Halliburton, GE,
Chubb, Steel Dynamics, CoStar, Pepsico, IDEX, EQT, Baker Hughes,
Seagate Technology, Quest Diagnostics, Freeport-McMoRan,
Kimberly-Clark, Danaher, Nextera Energy, Enphase Energy,
Pentair, Equity Residential, Veralto, Pultegroup, Fiserv,
Sherwin-Williams, WR Berkley etc
* Bundesbank President and European Central Bank policymaker
Joachim Nagel speaks; Bank of England chief economist Huw Pill
speaks
* US Secretary of State Antony Blinken visits China
* US Treasury sells $69 billion of 2-year notes 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World economy generating positive surprises in '24    https://tmsnrt.rs/4b9FdSN
A diverging US/Europe rates outlook     https://reut.rs/3UhunTY
Tesla's margin set to slump as price cuts sap profits    https://reut.rs/3QdF3lk
UBS projections on Tech EPS growth    https://reut.rs/3UsVtIQ
Trump has slight edge in most swing state polls Trump has slight
edge in most swing state polls    https://reut.rs/3U917P1
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (By Mike Dolan, editing by Ed Osmond,
mike.dolan@thomsonreuters.com)
 ((mike.dolan@thomsonreuters.com; +44 207 542 8488; Reuters
Messaging: mike.dolan.reuters.com@thomsonreuters.net))