Morning Brew April 25 2024

Good morning,

Meta did the opposite of Tesla, it beat the headline analyst expectation but the outlook disappointed. In late trading, Meta suffered a loss from 493 to 418 – app USD 200bio.

With Microsoft and Alphabet reporting earnings today, expect a lot of nervousness in Tech stocks. Nvidia lost 3.3% yesterday and is not down 15% on the month. Tesla held on to a good deal of the after earning gains

Peter wrote on the outlook: The status of Tesla:

• Tesla's net financial remains strong.
• Musk delivered the exact showmanship that was needed to flip the narrative from the company’s worst quarter in more than a decade into investors believing in the future. He was successful in convincing investors that growth is coming, sending the company’s shares up 13% in extended trading.
• Musk tries desperately to maintain Tesla’s status as a technology company with the introduction of the “cybercab”. But the reality is that self-driving cars are almost impossible to deliver with current technology, and his previous forecasts about this have been horribly wrong.
• Tesla is under immense pressure from falling demand and intense price competition in the electric vehicle industry. That will not change any time soon, and Tesla is in for some rough quarters.
• Tesla’s latest price reduction, which came as late as last week, will continue to eat into revenue and margins in Q2.
• The 10% layoff announcement earlier in April is a sign of crisis, especially if it is to be believed that Musk argued for slashing 20% instead.
• Tesla’s results and stock performance in 2024 underscore that we cannot talk about the Magnificent 7 any longer, but rather the 6-Pack (Nvidia, Microsoft, Alphabet, Meta, Apple, and Amazon).
• The biggest outstanding question is whether there is any meaningful moat in EVs. Maybe James Dyson was right in 2019 when he ditched the EV market saying “they’re simply too easy to make”. If there is no moat, then Tesla’s valuation will be difficult to defend.

This morning, Deutsche Bank and BNP surprised with better than expected results, Sanofi and Nestle miss. Toyota global sales rose 7.3% to 10.31 million units surpassing the 10 million mark for the first time.

Indexes went out of trading little changed yesterday, today the US 500 is at 5036, the US 30 38375, US Tech 100 NAS 17304. The Japan 225 lost to trade at 37622 and the GER40 18026.

US 10 Year yields are slightly higher at 4.64, the USD Index is little changed, but the individual components moved a good deal. EURUSD rose to above 1.07 to 1.0710 while GBPUSD 1.2470. USDJPY soared through the 155 to now trade 155.70. With the Bank of Japan meeting today and tomorrow, there is a lot of pf pressure for them to take some action. The Time of the Japanese rate decision is never set in advance, it will be some time tomorrow in the European morning most likely. The current expectation for the Bank of Japan is no action at this meeting but rate increases amounting to 25 bps by year end. Also worth noting is that CNHJPY is at the highest level I can find.

Gold and Silver are above support at 2317 and 27.15.

Overall risk sentiment seems a bit shaky with lots of nervousness that big tech can justify the current levels.

Key items up today are the the Turkey rate decision if you are into EM currencies, the US GDP and earnings with severe risk of interventions in China and Japan

Thursday

- Data Turkey Rate Decision, US Initial Jobless Claims, GDP Advance
- Earnings: American Airlines, Caterpillar, AstraZeneca, Microsoft, Alphabet, Intel, Snap, Roku, T-Mobile, Gilead

Friday
- Data US PCE
- Earnings: Exxon Mobil, Chevron, Colgate Palmolive,