Behind the market rally, Tesla may be struggling in China
The big question is whether markets can 'go on with it’ this week after Thursday’s mega bounce and Friday’s more restrained follow-up.
There’s a bit more data ahead with last week dominated by Thursday’s consumer price Index (CPI). This week it's the turn of the producer price index (PPI) to either confirm or undermine the hint of inflation relief from the CPI coming in under forecasts at an annual 7.7 per cent
Economists at Moody’s wrote at the weekend that "the producer price index serves as a good leading indicator of whether consumer price growth is likely to continue slowing in the near term.’
The S&P 500 closed out its best week since June as a report showing slowing inflation on Thursday raised hopes that the Federal Reserve would soon slow its tightening campaign. The broader market index added 0.9 per cent, bringing its gain for the week to 5.9 per cent, its best week since the week ending June 24 of this year. The Nasdaq Composite added 1.9 per cent and the Dow Jones Industrial Average gained 0.1 per cent.
Tech stocks on Friday shook off a decline in cryptocurrencies, which came under pressure Friday after FTX announced it’s filing for bankruptcy, Bitcoin fell 5 per cent, and Ether declined more than 3 per cent. Still, tech stocks and related crypto stocks rebounded after opening lower Friday.
The gyrations Elon Musk is engaging in at Twitter to save his $US44 billion investment is far more important to stockmarket sentiment than the continuing implosion of the crypto world.
As Elon Musk struggles to contain his growing losses at Twitter, Tesla’s struggles in China are raising questions about the revenue and earnings stability of the EV making giant. The past month has seen two price cuts for its Shanghai-produced Model 3 and Model Y vehicles sold into China. The cuts were not explained by Tesla and most reports said it was in response to the soaring sales of Chinese rivals, led by BYD.
And this is important for the renewables sector, especially lithium, cobalt, nickel and copper suppliers and battery makers. While demand won’t be hit in the medium to long term if Tesla loses its way, the short term impact could be very worrying.
Across the sectors Energy was the standout with Health Care lagging.
Shares of Amazon were up more than 4 per cent, while Google-parent Alphabet was roughly 3 per cent higher.
Stocks with a high exposure to China popped after Beijing said it would lift some Covid restrictions, shortening quarantine time for international travellers by two days.
Casino stocks Wynn Resorts and Las Vegas Sands were more than 8 per cent and 6 per cent higher, respectively.
And on the earnings front this week the focus is on retail with Walmart ,Home Depot, Macy's and Kohl's all reporting which should give insight into how the consumer is reacting to higher prices.
Currencies
One Australian dollar at 7:20 AM has strengthened compared to the US dollar on Friday buying 67.21 US cents (Fri: 66.24 US cents), 56.94 Pence Sterling, 93.32 Yen and 64.88 Euro cents.
Commodities
Iron ore is 4.7 per cent higher at US$92.25 tonne.
Iron ore futures are pointing to a 2.7 per cent gain.
Gold added $15.70 or 0.9 per cent to US$1769.40 an ounce.
Silver lost $0.04 or 0.2 per cent to US$21.67 an ounce.
Copper jumped $15.55 or 4.1 per cent to US$391.35 a pound.
Oil gained $2.49 or 2.9 per cent to US$88.96 a barrel.
Futures
The SPI futures are pointing to a 0.6 per cent gain.
Figures around the globe
Across the Atlantic, European markets closed mixed. Paris added 0.6 per cent, Frankfurt also gained 0.6 per cent and London’s FTSE closed 0.8 per cent lower.
In Asian markets, Tokyo’s Nikkei gained almost 3 per cent, Hong Kong’s Hang Seng jumped 7.7 per cent and China’s Shanghai Composite added 1.7 per cent.
On Friday, the Australian sharemarket gained 2.8 per cent to close at 7158.
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Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
Copyright 2022 – Finance News Network
Source: Finance News Network
