David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Tesla Shares Drop After Investor Day Without Any New Models

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    “I’d love to really show you what I mean and unveil the next-gen car, but you’re going to have to trust me on that until a later date,” Franz von Holzhausen, Tesla’s design chief, said at the company’s headquarters in Austin, Texas. “We’ll always be delivering exciting, compelling and desirable vehicles, as we always have.”

    Tesla shares fell as much as 8.6% as of 8:40 a.m. Thursday in New York, before the start of regular trading. Anticipation of the event contributed to a surge in the stock that added more than $300 billion of market value in two months.

    Letdown
    Musk, 51, confirmed Tesla will build a new plant in Monterrey, Mexico, in what he said was probably the most significant announcement of the day. The chief executive officer said Tesla will make its next-gen vehicle there, and that the company will hold a grand opening and groundbreaking at an
    unspecified date.

    When asked when the carmaker will show a prototype and if he could share details about the size, content and performance of the vehicle, Musk responded that Tesla also will hold a “proper sort of product event” at some point, but didn’t say when.

    “We’re gonna go as fast as we can,” said Lars Moravy, Tesla’s vice president of vehicle engineering. “We expect that to be a huge-volume product.”
     

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    First Solar Shares Surge to 14-Year High as Order Backlog Swells

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    The surging demand comes as the company is poised to benefit from the Inflation Reduction Act, the landmark climate bill signed last year by President Joe Biden that subsidizes domestic manufacturing. Even before the bill passed, First Solar saw strong demand for its modules. It has since announced a new factory in Alabama and Chief Executive Officer Mark Widmar indicated on an earnings call that further expansion is possible.

    The years-long backlog of orders caught the attention of analysts and investors. Goldman Sachs Group Inc. analyst Brian Lee boosted the price target on the stock to a Wall Street-high of $260 from $231 on Wednesday, noting the company is “booking well into the 2nd half of the decade at this point.”

    The US is expected to significantly boost its reliance on solar power in its push to slash carbon emissions. First Solar, the country’s biggest panel maker, has focused on dominating that market.

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    Flying recovery proves a tailwind for new Rolls-Royce boss's turnaround

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    "There is good performance improvement opportunity in this business in all the divisions, especially in civil aerospace and power systems," he told reporters. "And that is ongoing and then strategic review will create the clarity."

    He said he would focus on reducing its debt, which stood at 3.25 billion pounds at year-end, to obtain an investment grade, before resuming payouts to shareholders.

    Rolls, which also has defence and power systems divisions, posted operating profit of 652 million pounds for 2022, up 57% and beating an analyst forecast of 478 million pounds.

    It guided to underlying operating profit of 0.8-1.0 billion pounds and free cash flow of 0.6-0.8 billion pounds this year, based on a forecast for its engines to fly 80-90% of 2019's level.

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    Email of the day on precious metals and buying Ukrainian stocks

    Could you please share your thoughts and help on the following two issues.

    1. It seems that gold and silver found some kind of support after recent decline, both on the upper side of the underlying ranges, at about $1,800 and $21 respectively. Do you think, it can be so? Should we await them ranging for significant amount of time, as they usually do? Can this be just a short-term support after which decline will continue? And what about platinum?

    2. Baron Rothschild is credited with saying, “The time to buy is when there's blood in the streets, even if the blood is your own.” Also, John Templeton bought shares of more than 100 companies at the beginning of the WWII. I think, some investors may consider it worthwhile to look at the Ukrainian stock market today. But it is rather small, and information is poor.

    In the chart library, it is even not clear what is the main stock index. With your resources, maybe you can look if there are any instruments available for international investors, be it Ukrainian ETFs or mutual funds. At East Capital, that specializes at East European markets, I found none. The same, at Franklin Templeton. Ukrainian leading firm Dragon Capital seems to offer just brokerage services and private equity, not asset management. I suppose, the Ukrainian market is too small to be considered for a separate fund but may be, say, an East European fund with Ukrainian stocks can be found. Also, 10-15 years ago, the Warsaw Stock Exchange, in an attempt to become the regional financial centre, courted Ukrainian companies as well so some of them can be listed there.

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    Chinese Markets Roar Back on Upbeat Data Ahead of Congress

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    China’s manufacturing activity recorded its highest monthly improvement in more than a decade in February, while services also showed stronger-than-expected performance. With home sales rising for the first time in 20 months, the string of positive data helped allay concerns over the nation’s recovery from the damage induced by its Covid Zero policy.  

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    Inflating inflation fears

    Thanks to a subscriber for this article from Saxo Bank which may be of interest. Here is a section:

    Wage pressures are a key concern
    Despite widespread news of tech layoffs, the January jobs growth of +517k sent a shockwave to the markets. Unemployment rate touched a 53-year low as service providers expanded their activities. Likewise, jobless claims data and surveys on unemployment all continue to point at hiring and wages would remain on an upward path.

    With the demand and supply imbalance in the labor markets continuing, companies are feeling wage pressures eat into their margins. As the US consumer is still holding up well even in the wake of high inflation and interest rates, companies with pricing power will pass on these wage costs to the consumers, thereby creating more upside pressures to inflation and a potential wage-price spiral.

    Re-acceleration of cyclical growth
    Transition from a recession to a goldilocks/soft-landing narrative to the current no-landing/acceleration narrative isn’t all positive for the markets. The Atlanta Fed GDPNow model estimate for real GDP growth in Q1 is now at 2.7% from 0.7%, which is hardly a sign of recession or stagnation.

    Overall, recent economic data suggests that the US economy is reheating, and the market is moving to price that in by bringing the terminal rate forecast higher and driving out the rate cuts priced in for this year to 2024. This also brings back the risk of higher inflation. The reopening of the Chinese economy also brings fears of an inflationary impulse through commodity and raw material prices.

    Cleveland Fed economists Randal Verbrugge and Saeed Zaman have said that it will likely take US inflation many more years than central bankers and financial markets expect to close in on 2% without a deep recession.

    Upward repricing of the Fed path
    Beyond cyclical risks, inflation continues to face upside threat from structural factors such as shortage of labor, deglobalization as well as the energy supply crunch. US breakevens are signalling renewed concern that inflation will stay elevated in the shorter term, with the 2-year rate above 3% for the first time since August 2022 and the 10-year rate holding at around 2.5%.

    As such, market expectations of the Fed path have seen a dramatic shift from expecting a pause/pivot to now pricing in a terminal rate of 5.4% from sub-5% a month back. Calls for 6-7% terminal rates have also picked up. But the Fed has already transitioned to a 25bps rate hike pace, and it would potentially be a credibility issue if they were to move back to 50bps rate hike increments. So, a longer tightening cycle looks like the most likely outcome.

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    Applied Materials to Challenge ASML's Grip With New Machines

    This article from Bloomberg may be of interest to subscribers. Here is a section: 

    The company’s Centura Sculpta machine — a so-called pattern shaping system — lets customers reduce the amount of time they spend on lithography, the process of using light to burn lines into silicon. Lithography has become increasingly complex and expensive, and the new approach will help streamline chip production while reducing waste, Applied Materials said Tuesday.

    The move threatens to disrupt a lithography market dominated by ASML’s machines. Though Applied Materials isn’t challenging that company directly, it’s attempting to rethink the way the industry manufactures chips — the tiny electronic components that are built by depositing materials on disks of
    silicon.

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