LDN - Business

Morning Bid: Tesla catches break, Meta next; TikTok countdown

[April 24, 2024] A look at the day ahead in U.S. and global markets from Mike Dolan

Ailing Tesla shares caught a rare 10% break overnight despite the electric auto giant's quarterly revenue miss, underscoring a better market mood as Meta steps up to the earnings dock later and U.S. business activity cools in April.

Deep in a global price war and hit by waning worldwide demand for electric vehicles, Tesla said its quarterly revenue fell for the first time since 2020 and by more than Wall St analysts had forecast. Revenue per vehicle plunged 5% from year ago.

But perhaps reflecting the extent of short-selling that fed this year's 42%-plus stock drop up to Tuesday's close, shares surged once the report was released after the bell - ostensibly cheered by somewhat vague plans to introduce low-cost "new models" by early 2025 and boss Elon Musk's update.

More buoyant tech stocks generally helped as the megacaps shape up to report their quarterlies through this week and next. The S&P500 at large clocked a second straight day of gains on Tuesday, which saw the index recover more than a third of the near-6% peak-to-trough slide this month.

Facebook parent Meta Platforms, one the big winners from the artificial intelligence boom of the past 18 months and whose stock is still up more than 40% this year, reports after the market close on Wednesday.

In the background, the U.S. Senate voted by a wide margin late Tuesday in favor of legislation that would ban TikTok in the United States if its owner, the Chinese tech firm ByteDance, fails to divest the popular short video app over the next nine months to a year. The move ups the ante in the increasingly tense U.S.-China tech standoff.

The four-year battle over TikTok, which is used by 170 million people in the United States, is just one front in a war over the internet and technology between Washington and Beijing. Last week, Apple said Beijing had ordered it to remove Meta Platforms' WhatsApp and Threads from its App Store in China due to Chinese national security concerns.

U.S. Secretary of State Antony Blinken arrives in Shanghai on Wednesday with U.S.-China ties fragile and with a daunting array of unresolved issues between the two global rivals.

As Blinken hits Beijing, President Joe Biden will sign a bill into law that provides billions of dollars of new aid to Ukraine for its war with Russia, a bipartisan victory for the president as he seeks re-election.

Also lifting investor spirits yesterday was this month's flash U.S. business readings from S&P Global that showed a surprising slowdown in overall activity in April and ebbing price pressures and labor costs.

Even though the miss may seem worrying, markets read the report as a potential relief to the increasingly hawkish Federal Reserve - helping Fed rate futures and Treasuries rally.

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A trader works on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 5, 2024. REUTERS/Andrew Kelly/File Photo

Helping the $69 billion two-year note auction in the process, the report dragged two-year Treasury yields back from 5% - although they continue to hover about 4.94% early on Wednesday as another $70 billion of 5-year notes is up for grabs later in the day.

The markets didn't run away with the S&P Global business survey for two reasons - they want to see any April slowdown confirmed by equivalent ISM surveys due next week and they were sideswiped by rebounding March new home sales data released shortly after.

And that kept the dollar buoyed, not least against Japan's yen - where it inched ever closer to 155 yen at 34-year highs just as the Bank of Japan meets this week.

The weak yen and rallying tech sector saw Japan's Nikkei outperform generally buoyant world stocks on Wednesday, with gains of more than 2%.

The U.S. business readings stand in contrast to the better-than-forecast purchasing managers' surveys from the euro zone and Britain.

Reinforcing those numbers on Wednesday, German business morale captured by the Ifo survey improved more than expected in April.

European bourses and Wall St futures were higher as earnings streamed in on both sides of the Atlantic.

Shares in French luxury group Kering were a standout mover, falling by almost 10% in early trade to their lowest level in over 6 years as the market digested news of a likely 40%-45% plunge in first-half operating profit.

Key diary items that may provide direction to U.S. markets later on Wednesday:

* US March durable goods orders

* US corporate earnings: Meta Platforms, IBM, Ford, Boeing, Lam Research, General Dynamics, CME, AT&T, Hasbro, Norfolk Southern, Universal Health, Molina Healthcare, Amphenol, Chipotle, Masco, Bunge, Otis, Hilton, Fortive, Westinghouse, Interpublic, Teradyne, United Rentals, Tyler Technologies, Align Technology, Avery Dennison, TE Connectivity, Rollins, O'Reilly Automotive etc

* European Central Bank board member Isabel Schnabel speaks; Bank of Canada releases minutes of latest policy meeting

* US Secretary of State Antony Blinken visits China. German Chancellor Olaf Scholz meets British Prime Minister Rishi Sunak in Berlin

* US Treasury sells $70 billion of 5-year notes

(By Mike Dolan, editing by Christina Fincher, mike.dolan@thomsonreuters.com)

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