Head of Saxo Strats
Summary: European car sales is down 7.4% y/y in January due to new taxes but also consumers holding back amid the ongoing transition to electric vehicles. We reiterate our negative view on car companies. Tesla on the other hand is experiencing strong momentum and has just recently secured $2bn in equity financing to fund an increase in capital expenditures to capitalize on its lead position in electric vehicles.
European car sales figures for January are out today and they show a 7.4% drop y/y partly driven by new taxes hitting demand but also recurring signs of consumers holding back due to electric vehicle supply is expected to increase soon. Many consumers are not willing to own an asset that is arguably the past when the future of electric vehicles is just around the corner. January car sales figures in China were very weak and the annualized growth declined even further highlighting the economic weakness in China and this was even before the COVID-19 accelerated. The weighted annualized growth rate across Europe, China and the US is -0.6% in January. Our main view is still negative on car industry due to transformation into electric vehicles which will constrain profit growth for years to come.
While many carmakers are struggling with growth and profitability the market is still excited over Tesla which just recently took advantage of its high share price to raise $2bn in equity capital to fund an increase in capital expenditures and strengthen the balance sheet. Tesla is using its recent momentum to accelerate production and sales in China with its new car factory in Shanghai and is also constructing a new car and battery factory in the Berlin area. The recent share price increase has astonished analysts, but the share price is holding on to the gains as investors are likely seeing Tesla as the best pure play on the transition to electric vehicles.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
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Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
