Futures Rise For Third Day As Tesla, Texas Instruments Surge Boosts Tech Stocks

Equity futures rose for the third day in a row - last week's brutal drubbing a distant memory -  with tech outperforming as Tesla soars premarket after Elon Musk vowed to launch less-expensive vehicles as soon as late this year while Texas Instruments jumped 7% after it forecast revenue above the average analyst estimate.  The tech rally has kept stocks afloat after disappointing earnings in the European banking and luxury sectors. Technology shares stood out in the US, with contracts on the Nasdaq 100 rising 0.6% compared with a 0.3% gain for S&P 500 futures.  Bond yields are 1-3bps higher, helping to boost the USD. Commodities are lower though base metals are positive. The macro data focus is on Durable/Cap Goods with META headlining today’s earnings releases. Keep an eye on macro read throughs from F, HAS, NSC, ODFL, SYF, WHR earnings, among others.  

In premarket trading, Tesla soared 12% with analysts saying first-quarter results were not as bad as feared. The electric-vehicle maker is accelerating the launch of less-expensive cars in a bid to revive cooling demand. TXN jumped 7.3% following earnings while META +2.1% (which reports after the close), NVDA +1.8%, with the balance of Mag7 are all higher. Copper mining giant FCX is also +1.5% pre-mkt, and may point to investors looking at the broadening AI trade again.

• Enphase Energy shares drop 7.9% after the solar-equipment manufacturer reported first-quarter adjusted earnings per share and revenue that missed expectations. Additionally, the company issued a second-quarter revenue forecast that disappointed.
• MSCI shares rise 2.2% after the investment support company was upgraded to buy from hold by Deutsche Bank.
• Semiconductor stocks gain after Texas Instruments forecast revenue for the current quarter above the average analyst estimate, signaling a possible pickup in demand for industrial and auto components. Texas Instruments (TXN US) +7.0%, Luminar Technologies (LAZR US) +4.1%, ON Semiconductor (ON US) +5.1%, ARM Holdings (ARM US) +4.0%, Super Micro Computer (SMCI US) +3.3%, Analog Devices (ADI US) +3.2%, Wolfspeed (WOLF US) +2.8%
• Sirius XM (SIRI US) shares climb 3.8% after Citi raised its recommendation on the stock to neutral from sell.
• Travere Therapeutics (TVTX US) shares rise 6.8% after the biopharmaceutical company said the European Commission has granted conditional marketing authorization for Filspari (sparsentan) for the treatment of IgA nephropathy.
• VinFast (VFS US) shares trade 4.1% higher after the EV manufacturer signed agreements with 12 US dealers, bringing its total number of dealers in the US to 18.
• Visa (V US) shares rise 2.8% after the credit card company reported first quarter earnings that beat estimates, surprising analysts.

Overnight, the Senate passed a long-delayed $95 billion emergency aid package for Ukraine and other allies, clearing the way for resumed arms shipments to Kyiv within days. It also voted to ban TikTok’s ownership by Chinese parent Bytedance. Looking ahead, Meta Platforms is due to report after the bell.

After a strong performance by US tech giants on Tuesday, attention will be on Meta as the next of the so-called Magnificent  Seven group of companies to report. International Business Machines Corp. and Boeing Co. are also due to release results.

“There are high hopes for big US tech,” said Alexandre Hezez, chief investment officer at Paris-based asset manager Group  Richelieu. “Inflation and valuation levels don’t seem to be a concern at the moment.”

European stocks edged higher, with the Stoxx Europe 600 rising 0.2% as a surge in the shares of ASM International NV was offset by declines for Lloyds Banking Group Plc. Luxury names dropped as Kering SA tumbled after warning that profit will plunge on slowing sales at Gucci, its biggest brand. Here are the biggest movers Wednesday:

• ASM International soars as much as 14% the most since July 2022 after the chip-equipment maker reported stronger-than-expected quarterly order intake, boosted by demand from chipmakers aiming for next-generation gate-all-around transistors and high bandwidth memory
• Kone rises as much as 5.5% after reporting first-quarter results that largely met expectations and reassured investors with specified revenue and margin targets, according to an Alphavalue analyst
• Ipsen advance rise as much as 3.7% to the highest in almost six months, after the French drugmaker reported sales for the first quarter that beat the average analyst estimate
• Kering slumps as much as 10% to a six-year low after the luxury goods maker warned that first-half recurring operating income would decline 40% to 45% in an update that analysts said was worse than expected
• Air Liquide shares fell as much as 1.9% after the French industrial gas group reported revenue for the first quarter that missed expectations in terms of organic growth
• Volvo Car falls as much as 8.8%, the most in five months, after the Swedish carmaker reported first quarter results which missed analyst estimates. DNB expects some consensus downgrades
• Eurofins Scientific declines as much as 6.2% after disappointing with a first quarter miss in revenue and softer unadjusted organic growth, according to Jefferies analysts
• DSV slides as much as 5.7% to the lowest since October as its adjusted net income missed expectations for the first quarter
• Croda shares fell as much as 4.7%, reversing earlier gains, as traders tried to make sense of the chemicals group’s first-quarter sales
• Orange slips as much as 2.7% after the French telecom operator’s results showed pressure in its home market, with the firm continuing to lose broadband customers while more mobile customers chose not to renew contracts
• Allfunds shares fall as much as 11% after the firm abandoned discussions over a potential sale of the European fund distribution platform, Bloomberg News reported

In FX, the Bloomberg Dollar Spot Index rose 0.1% while the Australian dollar tops the G-10 FX pile, rising 0.3% versus the greenback after inflation topped estimates.  Elsewhere, the yen remained a whisker away from the key 155 level to the dollar, with a former top Japanese foreign exchange official warning the country is on the brink of currency intervention.

In rates, treasuries were cheaper across the curve amid bigger losses in bunds and gilts after German 10-year auction and strong business sentiment gauge. Selloff began during Asia session when Australia’s bond market slumped on hot inflation data, its 3-year yield jumping as much as 19bps. US yields are cheaper by 3bp to 4bp across the curve with 10-year around 4.64%. Bunds and gilts lag by additional 1.5bp and 2.5bp in the sector. Australia’s 10-year closed almost 14bp cheaper on the day, its 2-year more than 18bp. Treasury coupon auctions resume at 1pm New York time with $70b 5-year notes, following strong 2-year note sale Tuesday. WI 5-year yield at around 4.655% is ~42bp cheaper than last month’s, which stopped through by 1bp in a solid sale. The week's auction cycle concludes Thursday with $44b 7-year note sale

In commodities, oil prices decline, with WTI falling 0.5% to trade near $83. Spot gold falls 0.3%. Iron ore rises to a seven-week high.

Bitcoin was flat and sits just above USD 66k, whilst Ethereum posted incremental gains and above USD 3.2k.

Looking at today's calendar, US economic data slate includes March durable goods order at 8:30am. There are no speeches from Fed members who entered quiet period ahead of May 1 policy announcement.

Market Snapshot

• S&P 500 futures up 0.2% to 5,116.75
• STOXX Europe 600 up 0.2% to 508.58
• MXAP up 1.7% to 173.35
• MXAPJ up 1.7% to 533.79
• Nikkei up 2.4% to 38,460.08
• Topix up 1.7% to 2,710.73
• Hang Seng Index up 2.2% to 17,201.27
• Shanghai Composite up 0.8% to 3,044.82
• Sensex up 0.3% to 73,996.06
• Australia S&P/ASX 200 little changed at 7,683.00
• Kospi up 2.0% to 2,675.75
• German 10Y yield little changed at 2.53%
• Euro down 0.2% to $1.0683
• Brent Futures down 0.4% to $88.08/bbl
• Brent Futures down 0.4% to $88.08/bbl
• Gold spot down 0.2% to $2,318.21
• US Dollar Index up 0.20% to 105.88

Top Overnight News

• China’s central bank has again reiterated its cautious approach to monetary easing, reinforcing views that it’s unlikely to deliver a big liquidity boost via bond trading. WSJ
• The United States has preliminarily discussed sanctions on some Chinese banks but does not yet have a plan to implement such measures, a U.S. official told Reuters on Tuesday, as Washington seeks ways to curb Beijing's support for Russia. RTRS
• Australian CPI remained strong in the latest quarter, illustrating the challenge the country’s central bank faces in bringing inflation back to target and adding uncertainty around the timing of interest-rate cuts. CPI rose by 3.6% in the March quarter from a year earlier, meaning the annual inflation rate is now more than half of its peak at the end of 2022. Still, CPI rose by 1.0% on a quarterly basis, accelerating from the 0.6% increase recorded for the three months through December. WSJ
• Indonesia surprises markets with a rate hike (most assumed policy would stay unchanged) as the central bank looks to bolster the tumbling rupiah. WSJ
• UBS Chairman Colm Kelleher said the bank is “seriously concerned” about proposed Swiss capital reforms. “Additional capital is the wrong remedy,” he told the AGM. BBG
• US crude inventories fell by 3.23 million barrels last week, API data is said to show. That would be the first drop in five weeks if confirmed by the EIA. Stockpiles at Cushing, as well as gasoline supplies declined. BBG
• The long-delayed $95 billion emergency aid package for Ukraine and other besieged allies passed the Senate. It included tacked-on legislation requiring TikTok’s Chinese owners to divest or face a US ban. Joe Biden plans to sign the bill today — beginning a 270-day countdown for Bytedance and a hefty legal fight. BBG
• Trump won the Pennsylvania primary, but Haley still captured the support of more than 155K voters despite being out of the race for more than a month, underscoring the existing rift within the GOP. NYT
• Tesla +12%  premarket as investors cheered its pledge to speed up the launch of more affordable models to as soon as this year, even as profit and sales missed. Big Tech focus now turns to Meta’s earnings, due after the bell. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks gained as the region took impetus from the rally on Wall St where soft PMI data spurred a dovish reaction across asset classes. ASX 200 was led by gold miners after several quarterly production updates but with the advances in the index capped by firmer-than-expected CPI data. Nikkei 225 outperformed its peers and rose above the 38,000 level amid tech strength. Hang Seng and Shanghai Comp. conformed to the broad upbeat sentiment seen across the region amid tech strength in Hong Kong as SenseTime shares surged over 30% following the unveiling of its latest AI model. However, gains in the mainland were capped after the US Senate passed the Ukraine, Israel and Taiwan aid package which includes the threat to ban TikTok in the US.

Top Asian News

• EU opened a probe into China's procurement of medical devices, according to Bloomberg.
• BoJ is to discuss the impact of the yen's rapid slide at this week's policy meeting and a further rate hike is seen as unlikely on Friday as the Bank keeps a close eye on inflation, according to Nikkei. BoJ is closely watching core inflation as it weighs the timing of additional hikes and rather than rushing further tweaks, the BoJ aims to carefully monitor moves by smaller businesses to raise pay and pass along increased costs to customers. Furthermore, a BoJ source said they want to confirm that the cycle between wage and price growth is strengthening and many at the BoJ believe that the weak Yen is not currently adding to inflation, while the increase in long-term interest rates is helping to keep the yen from weakening further.
• Indonesian Lending Facility Rate (Apr) 7.0% vs. Exp. 6.75% (Prev. 6.75%); Deposit Facility Rate (Apr) 5.5% vs. Exp. 5.25% (Prev. 5.25%); 7-Day Reverse Repo (Apr) 6.25% vs. Exp. 6.0% (Prev. 6.0%).
• SK Hynix (000660 KS) announces investment in new DRAM chip production base in South Korea; will invest KRW 20tln

European bourses, Stoxx 600 (+0.2%) are mostly firmer; price action today has been contained within tight ranges, although bourses remained at session highs throughout the morning. European sectors are mixed; Tech is the clear outperformer, following significant post-earnings strength in ASM International (+10.5%). Basic Resources benefits from broader strength in base metals prices. Banks are found towards the bottom of the pile, after Lloyds (-0.9%) reported softer NII metrics. US Equity Futures (ES +0.2%, NQ +0.6%, RTY -0.2%) are mixed, with clear outperformance in the NQ, whilst the RTY lags. The former benefits from Tech-led gains, after Texas Instruments (+7%) reported strong results. Additionally, Tesla (+10.5%) benefits pre-market, despite missing on top and bottom lines, as traders focus on plans for affordable models.

Top European News

• ECB's Nagel said June rate cut is not necessarily followed by a series of rate cuts; not fully convinced that inflation will actually return to target in a timely sustained manner, services inflation remains high, driven by continued strong wage growth.
• ECB's Cipollone "Innovation, integration and independence: taking the Single Euro Payments Area to the next level"; text release not on monetary policy.

FX

• Dollar is showing mixed performance vs. peers but higher on an index basis following yesterday's PMI-induced losses. Currently towards the upper end of today's 105.59-88 range, and still yet to test its 10DMA at 105.96.
• EUR is a touch softer vs. the USD and back below the 1.07 mark after diverging PMI metrics yesterday helped prop up the pair. ECB speakers continue to talk up a June cut and as such attention is turning towards what happens beyond that meeting. Notable Opex for the pair: 1.0600-10 (1.5BLN), 1.0650 (1.06BLN), 1.0685-90 (426M), 1.0700-10 (3.07BLN), 1.0715-25 (1.3BLN), 1.0730 (260M), 1.0750 (230M).
• GBP is on the backfoot after a session of hefty gains yesterday thanks to PMI data and comments from BoE's Pill. Cable managed to top yesterday's best and print a peak at 1.2464 before trimming gains.
• Another day, another multi-decade high for the JPY with 154.96 the peak thus far. As the pair moves ever-closer to 155, focus is firmly placed on intervention watch. However, comments from a Japanese lawmaker earlier suggested that 160 could be the new "line in the sand" for officials.
• Antipodeans are underpinned by the risk environment and with outperformance in AUD due to firmer-than-expected inflation data. AUD/USD is back above the 0.65 mark with the pair topping out around its 200DMA at 0.6528.
• PBoC set USD/CNY mid-point at 7.1048 vs exp. 7.2336 (prev. 7.1059).

Fixed Income

• USTs pulling back after yesterday's PMI-induced gains which sent the 10yr benchmark to a 108.08 peak. Today's calendar sees US durables, however, greater focus may fall on the USD 70bln 5yr note auction given the well-received 2yr offering yesterday.
• Bunds are following suit to the selling pressure in global peers with traders also mindful of better-than-expected German IFO data. Bunds remains at session lows with focus on a potential test of the 130.52 YTD trough.
• Gilts remain pressured in an extension of yesterday's Pill-induced price action which saw traders re-evaluate the dovish price action prompted by Ramsden last Friday. The 96.40 low today is the lowest since 17th April with 96.01 thereafter.
• Orders for UK 4.375% 2054 Gilt exceed GBP 75bln (prev. GBP 57bln); price guidance 1.75bps (prev. 1.75-2bps), via bookrunner

Commodities

• Crude was initially propped up, benefiting from the post-US PMI Dollar weakness; though the complex has since succumbed to selling pressure amid the recent resurgence in the Dollar. Brent June currently holds around USD 88/bbl.
• Subdued trade across precious metals with spot gold and silver on a marginally softer footing, in fitting with the modest gains in the USD. XAU/USD sits in a tight range within USD 2,315.84-2,331.37/oz.
• Base metals are firmer across the board despite the stronger Dollar, but amidst a positive risk tone across global markets, with Chinese markets showcasing a strong performance underpinned by its tech and property sectors.
• China Coal Industry Group said cement industry capacity utilisation down to 50% (prev. 80% Y/Y), negatively impacting coal demand. Current domestic coal price of around CNH 800/metric ton seem as price floor for this year.

Geopolitics

• US Senate voted (79-18) to pass the USD 95bln bill with aid for Ukraine, Israel and Taiwan which also includes the threat to ban TikTok, while US President Biden said he will sign it into law on Wednesday.
• China's Taiwan Affairs Office said it resolutely opposes the inclusion of Taiwan-related content in the relevant bill of the US Congress, while it urged the US to fulfill its commitment not to support 'Taiwan independence' with concrete actions and stop arming Taiwan in any way.
• North Korean leader Kim's sister said North Korea will continue to build overwhelming military power to protect sovereignty and that the regional security environment is spiralling into turmoil because of US military manoeuvres, according to KCNA.
• Ambrey is aware of an incident Southwest of Aden, Yemen; "Yemeni sources: Houthis launch a ballistic missile towards the sea from in central Yemen", according to Sky News Arabia; details light.

US Event Calendar

• 07:00: April MBA Mortgage Applications, prior 3.3%
• 08:30: March Durable Goods Orders, est. 2.5%, prior 1.3%
• 08:30: March Durables-Less Transportation, est. 0.2%, prior 0.3%
• 08:30: March Cap Goods Ship Nondef Ex Air, est. 0.2%, prior -0.6%
• 08:30: March Cap Goods Orders Nondef Ex Air, est. 0.2%, prior 0.7%

DB's Jim Reid concludes the overnight wrap

A very big happy 50th birthday to DB's logo for tomorrow. It came into being on April 25th 1974. The slanting line within a box is at exactly 53 degrees which ahead of my own 50th in less than 2 months time is about the same angle as my back as I get out of bed every morning.

Markets went up at a similar angle yesterday, meaning that the S&P 500 (+1.20%) has now posted its strongest 2-day performance since February. Several factors helped to drive this, but perhaps the most important was actually the disappointing flash PMIs in the US, which added to hopes that rate cuts would still happen this year. That supported a rally in US Treasuries as well, with the 10yr yield (-0.9bps) falling back for a third consecutive day.

That rally yesterday was led by the M agnificent 7 (+1.96%), and after the close, we then received results from Tesla . These saw a headline miss on revenue ($21.3bn vs $22.3bn expected) and earnings estimates for Q1, with the company noting that “vehicle volume growth rate may be notably lower” in 2024 than in 2023. However, investors made a more upbeat take on the company’s strategy going forward, with a focus on “accelerating” the rollout of new cheaper models. This sent Tesla shares as much as +13% higher in after-market trading, so a sizeable degree of relief after the -42% decline the stock has seen so far this year up to the close (+1.80% yesterday). US equity futures are trading +0.36% higher for the S&P 500 and +0.72% for NASDAQ overnight on the back of this. I did a CoTD yesterday here showing that at its peak 2.5 years ago Tesla was worth the same amount as the next 12 largest global auto companies. It's still the largest but was "only" around $83bn larger than Toyota in second place at the close yesterday. So it's come back to the pack. It's been a heavily shorted stock of late so the rebound in after hours probably also has something to do with that.

Earnings season will continue apace today, as we’ll hear from Meta after the US close later. Before the Tesla results, the weakness in the US PMIs helped to set the tone, with Treasury yields seeing a sharp intraday decline after they came out. In terms of the details, the composite PMI was down to 50.9 in April (vs. 52.0 expected), which is the lowest in 4 months. And there wasn’t much relief from the subcomponents, as new orders were down to a 7-month low of 48.4, whilst the employment index fell to 48.0, which is its lowest since May 2020 at the height of the pandemic. In sectoral terms, services fell to a 5-month low of 50.9 (vs. 52.0 expected), and manufacturing was at a 4-month low of 49.9 (vs. 52.0 expected).

The release led investors to dial up their expectations for Fed rate cuts this year, and the chance of a cut by the July meeting moved up from 46% to 52% by the close. In turn, that sparked a rally for US Treasuries, with the 2yr yield down by -3.9bps on the day to 4.93%, having been as high as 4.998% at its intraday peak. 2yr yields had troughed shortly after a solid 2yr auction that saw $69bn of notes issued at 4.898%, -0.6bps below the pre-sale yield. Further out the curve, the 10yr yield (-0.9bps) fell back marginally to 4.60%, having been just shy of 4.65% before the US PMIs. With rates moving lower, the broad dollar index (-0.38%) saw its weakest day in nearly three weeks. This morning in Asia, yields on the 10yr USTs (+1.7bps) have edged back higher to 4.617% as we go to print.

The rates rally helped to spur a fresh advance for equities, with the S&P 500 closing up +1.20%. That was its best performance in two months, and it was aided by a strong performance for the Magnificent 7 (+1.96%). In addition, the advance was a broad-based one, and the small-cap Russell 2000 (+1.79%) had its best performance so far this month. Meanwhile in Europe, the STOXX 600 (+1.09%) also saw a sharp rise, and the UK’s FTSE 100 (+0.26%) edged up to a fresh record high.

Whilst European equities were advancing, and US rates rallying, it was a different story for European sovereign bonds, as the flash PMIs showed a further improvement in April. In particular, the Euro Area composite PMI hit an 11-month high of 51.4 (vs. 50.7 expected), and the services PMI was up to 52.9 (vs. 51.8 expected). The only notable weak spot was in manufacturing, where the Euro Area PMI hit a 4-month low of 45.6 (vs. 46.5 expected). And here in the UK, the composite PMI was up to 54.0 (vs. 52.6).

With that in mind, yields on 10yr bunds (+1.7bps), OATs (+1.6bps) and gilts (+3.6bps) all moved higher on the day. The move was particularly pronounced for gilts, as we also heard from BoE Chief Economist Pill, who struck a somewhat hawkish tone on the prospect of rate cuts. He said in a speech that “there are greater risks associated with easing too early should inflation persist rather than easing too late should inflation abate”. Along with the upside surprise in the PMIs, that led investors to dial back the chances of a cut by the June meeting, which came down from 64% the previous day to 48% by the close. However, at the ECB, there was a continued convergence on the idea of a June cut with market pricing for June "only" down just a touch from 87% to 85% after the decent composite PMI. Bundesbank President Nagel, once of the more hawkish voices, said that “ If the favourable inflation outlook from March is confirmed in the June forecast and the incoming data supports this forecast, we can consider lowering interest rates.”

Shifting perceptions over risks in the Middle East led to a volatile day for oil prices. Brent crude fell from $87 to $86/bbl early on in the US session, but was up to $88.42 by the close (+1.63%) amid lingering uncertainty over new US sanctions against Iran as well as reports that American Petroleum Institute data showed a decline in US crude inventories last week. Easing geopolitical fears also saw gold fall to below $2300/oz intra-day for the first time in over two weeks, but it was virtually unchanged by the close (+0.02% to $2,330/oz).

In Asia markets are rallying hard this morning with the Nikkei (+2.07%) sharply higher and leading gains across the region with the KOSPI (+1.91%) and the Hang Seng (+1.53%) also climbing. China stocks are lagging with the Shanghai Composite (+0.31%) seeing softer gains.

Early morning data showed that Australia’s consumer price inflation slowed less than expected in the first quarter, advancing +3.6% (v/s +3.5% expected), slowing from the +4.1% annual pace in the previous quarter, thus frustrating hopes for any interest rate cuts for the next several months. The important trimmed mean, rose +1.0% in the first quarter, again above forecasts of a +0.8% gain. The annual pace slowed to 4%, from 4.2% but still too high for comfort for the RBA. Following the data release, the Aussie jumped +0.7% to $0.6530 versus the dollar before settling at $0.6517, while yields on the 2yr (+16.7bps) and 10yr government bonds (+11.5bps) moved higher to trade at 4.06% and 4.38% respectively.

Staying with data but wrapping up the rest of the US action from yesterday, we also had US new home sales for March. They hit an annualised rate of 693k (vs. 668k expected), which is their highest level in 6 months. Separately, the Richmond Fed’s manufacturing index rose to -7 in April (vs. -8 expected).

To the day ahead now, and data releases include the Ifo’s business climate indicator from Germany for April, and in the US there’s the preliminary reading of durable goods orders and core capital goods orders for March. From central banks, we’ll hear from the ECB’s de Cos, Nagel, Villeroy, Cipollone and Schnabel. Finally, today’s earnings releases include Meta, IBM, AT&T, Boeing and Ford.