That was Tesla’s share price this morning, rising over 20% in after-hours trading after posting a surprise and healthy profit of $143 million for Q3. Analysts had mostly expected a loss, but the Elon Musk company increased deliveries and cut expenses as the share price powered through $300 in a cloud of battery-powered rubber.
With a Twitter account only slightly less controversial than the US President’s, Mr Musk is the enfant terrible of Wall Street and his company a favourite of institutional short-sellers. The latter will be licking their wounds today.
The Tesla result should give a further boost to regional markets this morning after a strong result from Microsft overnight, but glum reading from industrial bellwethers such as Caterpillar and Boeing. It should also ease the pain of a soft quarterly GDP print from South Korea, undershooting at 0.4%, and Japan’s Jibun Bank Flash Manufacturing PMI, which printed a disappointing 48.5, the lowest reading for over three years. The fallout from the trade war is for now gone, but certainly not forgotten, especially for trade-sensitive countries in the region.
With the South Korea and Japan data behind us, attention will turn to the Bank of Indonesia’s rate decision at 1530 SGT. It is the first interest rate decision after the inauguration of President Widodo for his 2nd term, and the announcement of his new cabinet that contained more than a few surprises, Bank Indonesia is expected to cut rates yet again by 0.25% to 5.0%. With thUS dollar mostly trading sideways to slightly weaker against EM currencies over recent times, Rupiah worries will have receded for the central bank allowing it to cut rates to support growth, which at 5.0%, remains stubbornly under the President’s 7.0% target.
With the US-China trade talks quiet for now, US earnings have driven volatility and market direction this week. However, some Tier 1 data returns today to provide some distraction. Germany presents Markit Manufacturing Flash PMI for October at 1530 SGT with a consensus forecast of a minuscule rise from last months 41.7 to 42. Neither number says Germany, and thus Europe are out of the woods, but the street will take any small win at the moment. A downside miss likely sees investors heading for the door on European stocks and the Euro in the short-term.
The last meeting of the ECB chaired by President Mario Draghi announces its rate decision at 1945 SGT today. Mr Draghi will finish his term with a quiet exit and a couple of wines, rather than a blaze of glory, as the ECB is universally expected to leave rates unchanged.
The US then releases Durable Goods Orders for Septemeber with the street forecasting a drop of 0.8% MoM. Although the US-China trade war has taken a back seat this week, like Elvis if you’re to believe the conspiracy theories, it most certainly hasn’t gone away; it just took a vacation. A 0.8% drop will imply the trade war has made its way to US shores, with a lower print likely sending shudders through stock markets and the dollar.
Returning to Tesla for a moment, whatever the future holds for it as behemoths like Volkswagon and Ford et al. gear up to crash its electric car party; the world needs upstarts like Tesla and its leader Elon Musk. This review of the year 2000 film remake, (I remember the original…) by Kim Newman of Empire magazine, sums Tesla up perfectly.
“Shallow and glossy, but the music is loud, the editing is fast, the cast is overqualified and the cars… well, they’re just cool.”
Equities
Wall Street refused to be cowed by uninspiring results from Boeing and Caterpillar overnight, preferring to concentrate on yet another quarterly performance by Microsoft. The S&P rose 0.29% to 3004.55, near all-time highs, the Nasdaq rose 0.19%, and the Dow Jones rose 0.17%.
Tech heavyweight Amazon reports today and will be the centre of attention. S&P futures are slightly higher in the after-hours trading, post the Tesla result, and Asia itself is following the positive lead.
Although the Kospi is slightly higher at 0.33%, the Nikkei is up 0.65%, the Hang Seng has risen 0.60%, and the ASX 200 is higher by 0.30%. With no drama at the USD/CNY fixing this morning, we would expect mainland exchanges to share the optimism over the day. Asia overall should trade in the green ahead of the German Manufacturing PMI later today.
FX
Currency markets were quiet overnight with even the GBP taking a breather, rising a modest 0.3% to 1.2910 as we await Europe’s decision on a Brexit deadline extension. The next decision after that being will a UK election finally happen?
The dollar index was almost unchanged at 97.46, showing how quiet currency markets were overnight. The PBOC’s Yuan fix came in at 7.0727, only modestly higher than 7.0667 yesterday. With the PBOC treading carefully with the currency with trade talks ongoing, today’s print probably signals a quiet day for FX traders in Asia.
This afternoon’s German Manufacturing PMI will probably carry more weight than the ECB rate decision. A weak number will likely cap the Euro’s recent gains to 1.1150, and an abysmal number could see the single currency falling back through 1.1000.
Oil
A surprise fall in both official US crude inventories and gasoline stocks was supportive for oil overnight. US Crude Inventories fell by 1.7 million barrels versus an expected rise of 2.23 million barrels, a welcome reversal of the past few weeks surprise increases.
The crude inventories print allowed oil to shake of less than stellar earning prints from industrials overnight, with Brent crude rising 2.35% to $ 61.30 a barrel, and WTI rising 2.80% to $55.00 a barrel. With the supply side of the global oil equation still ascendent, rallies are likely to be limited and short-term in nature, ex a US-China trade deal or action from OPEC+.
Oil has seen profit-taking in Asia after last nights sharp up move, with Brent crude lower by 0.30% and WTI lower by 0.60%.
Gold
Gold had another listless overnight session, rising 0.30% to $1492.00 an ounce, as investors attention remained focussed elsewhere. Gold is converging into a $1480.00 to $1500.00 daily range, implying that some sort of break-out is approaching. The triggers for it will be elsewhere though, and until that happens, gold will probably remain one of the most unexciting corners of the financial markets in the near-term.
