Tesla trading higher though misses estimates

Headlines

* Tesla report biggest revenues slide since 2012, but stock jumps after hours with release of new models

* BOJ to discuss impact of yen’s rapid slide at this week’s meeting

* Apple sends invites to May 7 launch event, new iPads expected

* Stocks rise for second day on solid earnings, UK’s FTSE 100 hits another record

FX: USD moved lower through recent lows at 105.74 after recent consolidation around 106. Data showed the US business activity eased in April to a four-month low due to weaker demand. Manufacturing fell below 50 which denotes expansion, while services dipped below forecasts to 50.9. There’s currently already crowded long dollar positioning, so weaker data could spark wider selling.

EUR climbed to a two-week high above 1.07. Eurozone PMIs signalled a pick-up in growth and suggested the economy is leaving stagnation. Inflationary pressures remain for the services sector. But there is still a high chance of a June rate cut. There seems to be a wide divergence in opinions at the ECB on what happens after the first reduction.

GBP bounced back after hitting five-month lows on Monday at 1.2299. Business activity was modestly improved, though manufacturing slumped below 50. Initial resistance is at 1.2465.

USD/JPY inched north again hitting fresh new multi-decade highs, but still below 155. There was more verbal jawboning from various Japanese officials. But the BoJ meet next week and there are doubts as to whether Tokyo will act so close to this. The yen is battling wide rate differentials which may cancel out any intervention over the medium term. EUR/JPY hit fresh multi-year highs.

AUD turned up for a second day ahead of today’s release of CPI data. Resistance resides above around 0.65. USD/CAD slid for a fifth consecutive day. Positive risk sentiment is helping the loonie. First decent support is at 1.3623.

Stocks: US equities kept the positive momentum from Monday’s rebound. Earnings from several companies buoyed the bulls. GM, UPS and Lockheed Martin all beat estimates. The broad-based benchmark S&P 500 finished 1.20% higher at 5070. The tech-laden Nasdaq 100 added 1.51% to close at 17,471. The Dow Jones underperformed again, rising 0.69% to settle at 38,503. That was the Dow’s third straight day of gains with prices moving above the 200-day SMA at 38,137. Gains were broad-based with ten out of eleven sectors rising. Softer PMI data saw Treasury yields fall modestly. Tesla climbed over 6% after hours after it announced it was bringing forward the launch of new cheaper models. Earnings missed expectations as revenues fell 9% on slowing demand and intense competition worldwide.

Asian Stocks: APAC futures are in the red. Markets traded mildly positive after tech led the way on Wall Street. The ASX 200 saw real estate and tech outperform after mixed PMI data. China indices were mixed, with the mainland lagging amid ongoing drafting of US sanctions. The Hang Seng outperformed again with tech strength.

Gold sunk to a low of $2291 before retracing most of its losses through the trading session. Recent dollar and yield strength as rate cuts bets folded have signalled a pullback was likely. Hedge fund liquidation could determine short-term price action.

Day Ahead – Australia CPI

Headline Australia inflation is expected to fall to 3.4% y/y in Q1 2024, from 4.1% in Q4 2023. Trimmed mean inflation is forecast to slide to 3.8% in Q1 2024 from 4.2% in Q4 2023. CPI is slowly heading in the right direction but still above the RBA’s target. Sticky components, like housing costs linger. Economists say this reflects a short supply of housing, given strong population growth.

The RBA is happy to take a gradual approach to get inflation to target. It is hoped this will enable the economy to remain close to ‘full employment’ while still bringing CPI down. An easing in GDP growth and gradual loosening in the job market is helping the disinflation process.

Chart of the Day – Nasdaq moves back above  200-day SMA

After a roughly five-month stretch that saw the tech-dominated Nasdaq go up almost 30%, April has seen risky assets experience their first real protracted down move since last autumn. A decline of near 10% saw prices fall below the 200-day SMA on Friday. The major reason for the sell-off is higher interest rates coming on the back of inflation and growth data that continue to exceed expectations. Markets price in about 43bp of rate cuts for this year. This was double just a month ago and about 150bps in January.

Other factors include geopolitical tensions in the Middle East, and earnings, both Q1 and expectations for the rest of the year, especially in tech where expectations have risen due to AI developments. Contributing to April performance is investor positioning, which had become elevated by the end of Q1. We get Meta, Alphabet and Microsoft results over the next couple of days. Tough quarter-on-quarter comparisons may be a high bar to major upside. For the Nasdaq, the 50-day SMA sits above at 17,950 with the recent low at 16,973. The 200-day SMA is at 17,387.

AUTHOR

Jamie Dutta >

Jamie Dutta is a Market Analyst for Vantage. He comes with extensive experience as a full-time trader and financial market commentator, having worked as a trader in top tier investment banks and trading houses.