Nio shares shorted despite sales beat

The news shaping the markets today

EU announced further aid of €205 million for Ukraine, continuing to provide support to Kyiv amid its ongoing war with Russia. The US dollar index traded slightly lower this morning.

Japan’s producer prices accelerated 9.1% year-over-year in May. However, the figure came in below market expectations of a 9.8% rise and supported the JPY/USD forex pair.

China’s annual inflation rate came in unchanged at 2.1% in May, from a five-month high in April. This was below analyst projections of 2.2%, which sent the CNY/USD pair higher in forex trading this morning.

Australia’s new home sales fell by 5.5% in May, following a 1.2% decline in the earlier month. Despite this being the second consecutive month of decline in new home sales, the AUD/USD forex pair remained elevated.

New Zealand’s electronic card transactions grew 0.7% year-over-year in May, after 2.1% growth a month ago. The news sent the NZD/USD pair higher in forex trading this morning.

What’s happening: Shares of Nio fell on Thursday, despite the company reporting better-than-expected revenues for its first quarter.

What happened: The Shanghai-headquartered company said its orders had remained at a record high in May, despite near-term headwinds.

Investors grew concerned, however, on the company’s forward guidance and a decline in one of its major metrics.

How were the results: The electric-vehicle maker reported a wider loss for the first quarter, but the adjusted figure still came in-line with expectations.

• Revenues climbed 24.2% year-over-year to $1.56 billion, topping market expectations of $1.49 billion.
• Losses were reported at $281.2 million, higher than the $68.8 million recorded for the year-ago quarter.
• Adjusted loss came in at 13 cents per share, in-line with market views.

Why it matters: The electric vehicle industry has been under significant cost pressures due to supply chain disruptions caused by the Russia-Ukraine war.

With a surge in prices of battery materials and other parts, Nio’s vehicle margins shrank around 310 basis points from a year ago to 18.1% and also contracted from the previous quarter’s 20.9%. Gross margins also contracted to 14.6% in the first quarter, from 19.5% in the year-ago quarter and 17.2% in the previous quarter.

Despite bottleneck, the company reported record high deliveries of 25,768 units for the first quarter and indicated that demand has continued to be strong.

Nio said it expects deliveries of 23,000 to 25,000 units in the second quarter. However, management issued weak revenue guidance amid ongoing production disruptions due to the resurgence of covid-19 in China. For the second quarter, the company projected revenues between $1.473 billion and $1.591 billion, up 10.6% to 19.4% from the year-ago period. This, however, fell short of analyst projections of $1.86 billion.

How shares responded: Nio’s shares tumbled 7.7% to close at $18.82 on Thursday, following the release of quarterly results. The stock has lost around 44% year to date.

What to watch: Traders will keep an eye on the current covid-19 situation in China, after parts of Shanghai returned to lockdown restrictions just a week after reopening. Investors will also monitor the health of the global supply chain.

The markets today

The Canadian dollar will be in focus today ahead of the jobs data from the country

Context: The CAD/USD forex pair fell on Thursday, amid a decline in crude oil prices.

Details: The loonie had surged to its strongest intraday level since April 21 on Wednesday but was unable to extend its rally on Thursday. The Canadian dollar retreated from a seven-week high, with markets awaiting the jobs report from the country today.

A decline in the price of crude oil, one of Canada’s major exports, also exerted pressure on the loonie. WTI crude for July delivery lost 60 cents to close at $121.51 per barrel on Thursday.

Investors also remained on the sidelines after some regions of Shanghai reimposed covid-19 restrictions.

Sentiment was supported to some extent by upbeat data from China, which showed that exports had jumped 16.9% year-over-year to a four-month high of $308.25 billion in May. China’s trade surplus widened to $78.76 billion in the month.

The US dollar index, which measures the greenback’s performance versus a basket of major currencies, rose by over 0.6% to 103.22 on Thursday. The CAD/USD forex pair fell by more than 1% to settle at 1.2700.

The S&P/TSX Composite Index also traded lower by around 1.1% on Thursday, with healthcare and metal stocks being among the biggest losers.

What to watch: Traders await the release of jobs report from Canada today. The unemployment rate in the country is expected to remain unchanged at 5.2% in May, while the economy is projected to add 30,000 jobs in the month, following 15,300 job additions in the previous month.

The release of US inflation data will also remain in focus today, with the country’s annual core inflation rate projected to ease to 5.9% in May, from 6.2% in the previous month.

Other Markets: European trading indices closed lower on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 1.54%, 1.71%, 1.40% and 1.36%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Spain’s consumer price index, Turkey’s unemployment rate, labour force participation rate and total motor vehicles production, Italy’s industrial production, Central Bank of Russia’s interest rate decision, Mexico’s industrial output, India’s foreign exchange reserves, industrial production and total passenger vehicles sales, Brazil’s retail sales, US University of Michigan consumer sentiment, government budget and Baker Hughes crude oil rigs, Germany’s current account, Australia’s new home sales, as well as China’s auto sales, new yuan loans, outstanding yuan loan growth, total social financing and money supply M2.