US markets (S&P 500 Index +2.6%) have produced a significant rally to begin October. A weaker than expected US ISM Manufacturing survey has driven a big fall in global interest rates overnight. The US 10-year rate is almost 20bps lower, at around 3.65%, with similar-sized moves seen in Europe. It’s been a case of ‘bad news is good news’ for equities which, after a miserable September, have put in a strong rally overnight. The rally is perhaps unsurprising after the huge selloff in equities experienced last month, with the S&P 500 down by more than -9.0%. The question is, how long will the rally last?
Credit Suisse (+2.3%) shares were put through the wringer on Monday, at one point trading down by -10.0% on the NYSE before regaining most of this downside to end in positive territory. The bank is fending off concerns regarding its “capital base and liquidity”.
European markets (Stoxx 600 Index, +0.7%) rose on Monday with Oil and Gas (+3.1%) helping to stem losses in other sectors.
The pound (+1.4%) continued its recovery against the greenback and now trades at $1.1314, while the euro (+0.2%) only rose marginally to $0.9814, but still below parity. The other key news overnight has been the abrupt (albeit not entirely unexpected) U-turn by UK Chancellor Kwarteng who announced the new government would retain the top 45% tax rate after all, bowing to pressure from markets, Conservative backbench MPs, and the general public.
Tesla (TSLA: NASDAQ)
Tesla (-8.6%) shares dropped considerably on Monday after the EV maker reported 343,000 vehicles delivered in the third quarter, 2023, falling short of analyst estimates.
Furthermore, Tesla unveiled its latest prototypical robot at the company’s ‘AI Day’ on the weekend, perhaps stoking investor concern that the company is straying too far from its core business, when competition in the EV space is gaining steam.
Tesla CEO Elon Musk said the robots would be available in three to five years for approximately US$20,00. However, Musk has repeatedly failed to meet delivery timeline and cost estimates for far simpler products, such as the Cybertruck that was revealed in 2019 and is still not available for purchase.
When we look at this company as a car company, we think it is extremely overvalued, but, if we look at Tesla and view them as a tech company, we could say Tesla’s share price could easier to justify. However, even as a tech company we believe they are still overvalued. Tesla’s stock price is incredibly volatile which makes us uncomfortable, and the volatility will continue to be heightened at these levels. Many Tesla investors buy this stock because it is a revolutionary trend and are not considering the true worth of the company.
Australian & New Zealand Market Movers
The Australian market (ASX 200 Index, -0.3%) was slightly down on Monday, led by losses in Technology (-4.6%) and Industrials (-3.0%). Broader markets losses were partially offset by gains made in Energy (+5.8%) and Materials (+2.6%). The Energy sector was encouraged by the rise in oil prices (+5.2%) as OPEC+ mulls cutting oil production by over 1 million barrels per day.
The Australian dollar (+1.9%) is up to $0.6520 against the US dollar, as the RBA gets ready to enact a 50-basis-points hike today, taking its cash rate to 2.85%.
The New Zealand market (NZX 50 Index, -1.0%) fell by a percent to start the week, led by losses in Real Estate (-2.5%). Precinct Properties (-3.9%), Kiwi Property (-3.8%), Summerset Group (-3.7%) were all stung with losses.
The key event for the NZ market this week is the RBNZ meeting on Wednesday, where the bank is expected to deliver another 50-basis-points hike.
On the currency front, the New Zealand dollar (+2.3%) has, at least temporarily, halted its fall against the US dollar, and now trades at $0.5724
What Markets will be Watching this Week (UTC –4)
Monday
AU RBA Interest Rate Decision
Tuesday
US JOLTs Job Openings (AUG)
NZ RBNZ Interest Rate Decision
Wednesday
US Unemployment Change (SEP)
US Balance of Trade (AUG)
Thursday
AU RBA Financial Stability Review
Friday
Us Non Farm Payrolls (SEP)