19 June 2020

Investors Unimpressed with Bank of England’s Moves


News shaping
the markets today


What’s happening: Tesla’s Model S Long Range Plus received an EPA rating, making it the first electric vehicle to receive a rating from the agency for over 400 miles.

What happened: The EPA (Environmental Protection Agency) said the model can go 402 miles on a single charge. “All Model S cars made since late Jan have 402 mile range,” Tesla’s CEO Elon Musk said in a tweet.

Meanwhile, Tesla’s shares have breached the $1,000 mark a couple of times this month, making it the most valuable in the world. The stock is being driven by soaring demand in China, the company’s plans to ramp up production of its electric freight truck - the Tesla Semi, and speculations of Tesla being in talks to expand its production capabilities in the US.

Why it matters: There has been a spike in the demand for electric vehicles globally, as countries look for options to lower their dependence on fossil fuels.

Against this backdrop, Tesla has been witnessing robust demand in China. The China Passenger Car Association (CPCA) said Model 3 sales from the company’s Shanghai facility had tripled to 11,095 vehicles in May, surpassing sales of local Chinese companies.

Tesla lowered its Model 3 price, after Beijing's Environmental Exchange launched an incentive program earlier this month for EV automakers selling vehicles below a specified price, said a report by Market Realist.

Investor sentiment was also boosted by CEO Elon Musk’s memo, which was published online stating that it was “time to go all out and bring the Tesla Semi to volume production.” There were also speculations of the company being in talks with the Texas government regarding an incentive package to set up a factory in Austin.

Till late last year, Tesla had only one production unit. The company set up its second facility in November in Shanghai, with the aim of gaining a strong foothold in the massive Chinese market. Tesla now has a plant underway in Germany and has indicated that another US-based assembly factory will be announced soon.

Earlier this month, the Nasdaq 100, of which Tesla is a major component, surged past the 10,000 milestone. Tesla traded as high as $1,027.48 on June 10 and went past the $1,000 mark earlier this week. The stock closed yesterday’s session at $991.79.

US indices trading was under pressure yesterday, with only the Nasdaq 100 gaining 0.2%. The Dow Jones index and S&P 500 lost 0.7% and 0.4%, respectively.

What to watch: Investors are hopeful of a strong rebound in Tesla’s US sales, which have been under pressure since the covid-19 outbreak. The company is also facing stiff competition from other EV leaders, like BMW. Although the stock has gained almost 25% over the past month, it has shed 3% in the past five days. Investors may see this as an attractive entry point, sending the stock past the $1,000 level again.

The Markets Today


The US dollar will be in focus today, ahead of a number of economic reports scheduled to be released later today.

Context: The US dollar closed higher on Wednesday, rebounding from early lows in the session, as investors sought the currency’s relative safe-haven status due to rising geopolitical risks.

Details: Clashes between Indian and Chinese soldiers in the border region, tensions between North and South Korea, a rise in covid-19 infections in six states in the US and new cases of the virus reported in Beijing dampened investor sentiment.

The US dollar index, which measures the greenback’s value versus a basket of foreign currencies, made a strong recovery from its three-month low reached last week. The currency’s safe-haven outlook does not appear that promising, as economic reports have started improving, lending support to US indices trading and sending stock higher.

The US dollar gained against the euro on Wednesday, with the EUR/USD forex pair settling at 1.1244. The US dollar index settled higher at 97.16 on Wednesday.

What to watch: Traders await various reports from the US which will decide the currency’s performance for the day. The reports scheduled for release today include initial jobless claims, Philadelphia Fed manufacturing index and CB leading index.

Around 1.3 million workers are likely to have filed jobless claims in the week ending June 13, following 1.54 million claims reported in the prior period. The Philadelphia Fed Manufacturing Index is expected to rise to -23 in June, from a reading of -43.1 in May.

Other Markets: European indices were trading lower at 8:30 am GMT, with the FTSE 100, French 40 and Dax 30 index down by 0.5%, 0.5% and 0.2%, respectively.

Support & Resistances
for Today


market snapshot


Futures at 0400 (GMT)

What else to watch today


UAE’s inflation rate, Bank of England’s interest rate decision, Canada’s new housing price index, wholesale sales and ADP employment, China’s foreign direct investment as well as the US natural gas stockpiles.


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