Equity Update: Tesla earnings, Apple in Google’s antitrust shadow, CNY and inflation

Equity Update: Tesla earnings, Apple in Google’s antitrust shadow, CNY and inflation

Equities 5 minutes to read
Peter Garnry

Chief Investment Strategist

Summary:  In today's equity update we take a look at Tesla ahead of tonight's Q3 earnings release which will focus on Chinese demand for Tesla's cars. We also cover the US government's latest antitrust case against Google for using it dominance as digital gatekeeper on Internet search queries to limit competition. Finally, we take a look at the stronger CNY and how it has the potential to export inflation into the developed world.


US equities are higher today renewed fiscal deal optimism and a set of positive US earnings in pre-market session from Abbott Laboratories, Verizon, Biogen, and Snap. On top of that we observe copper and US 30-year yields are higher underscoring that the reflation trade is back in town. Helping this trade is the stronger CNY which essentially has the potential to export inflation to the developed world.

Can Tesla deliver on the hype?

The earnings season is in full swing this week and tonight after the market close Tesla will report Q3 earnings which is one of the most anticipated earnings releases this season due to the hype of Tesla shares. Analysts expect revenue of $8.26bn up 31% compared to last year and EPS of $0.55 up 217% y/y. Tesla announced earlier this month around 140,000 deliveries in Q3 setting a new record and on track to potentially meet the 500,000 target for 2020, although it will require a substantial q/q increase in deliveries. The share price should not react too much on earnings numbers as the regulatory carbon credits can move the needle a lot, but even more importantly the CEO Elon Musk said on the Q2 earnings call that Tesla is not going to be super profitable in the short-term as it is maximizing growth rate and affordability of its cars. The key therefore is the outlook for the Chinese and European market including updates on the Gigafactory in Berlin and guidance on Model Y production which has the potential to accelerate Tesla’s lead over the competitors.

The technology regulation has started

Yesterday, the US government filed an antitrust case against Google which was recently part of a year-long investigation by the House Subcommittee on Antitrust where the committee looked at competition in digital markets. In case against Google is centered on its search engine and how Google is using its power to strengthen its stronghold on search queries on the Internet with its partnership with Apple being mentioned as an example. According to the antitrust documents it is estimated that Google pays Apple $11bn a year for having Google’s search engine as the default option in the Safari browser on Apple’s iPhones. The Google payments to Apple is roughly 19% of Apple’s profits and thus depending on the outcome of the antitrust case could be a massive tail-risk to Apple. The next obvious target for the US government seems to be Facebook but the attack will most likely not be launched until after the election.

The stronger CNY has the potential to export inflation

In today’s FX Update we go through the various factors behind the strengthening CNY which are a combination of domestic tightness in monetary policy, stability objective of China to increase appeal of its currency vs USD, and lastly the outlook for a Biden administration that could soften the stance on China. The Chinse manufacturing industry is producing many of the consumer goods enjoyed in the developed world and many are operating at low margin which means that a stronger CNY potentially exports inflation into the world as importers of Chinese goods will have to pay a higher price and Chinese manufacturers cannot offset the pressure on the product price because of thin margins. This would be a new dynamic to Chinese inflation into the world as the previous strong relationship has been tied to the producer price index in China. For now, actual measured non-financial asset inflation is still low in both the US (see chart) and Europe. However, on top of a stronger CNY and higher copper prices, the US 30-year yield is also moving higher reflecting investors expectations that inflation is coming.

Source: Bloomberg

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.