Financial market research and analysis

The day ahead will see earnings from EV carmaker and retail options trading favourite Tesla and the UK reports inflation stats at a critical stage in EU/UK trade negotiations.

This really feels like it's the last-chance saloon for a pre-election US stimulus bill and whether it happens or not will determine near-term direction. There are reasons to think it can swing either way. In terms of market reaction, a deal being signed now doesn't have to negate Biden signing off on a bigger one later too. Investors would probably prefer a bird in the hand than two in the bush. It should help risk assets if a deal were to be done before the election, even if were to narrow the odds for November 3rd.

MARKETS
-Tesla to report Q3 earnings – the first results after failing to get listed in the S&P index
- Netflix setup for opening losses on Wednesday after missing Q3 subscriber and EPS estimates
-Alphabet shares rise after Google gets sued by the Department of Justice
-Ant Group gets Hong Kong Exchange approval for its (possibly biggest ever) IPO
-Moderna CEO says its COVID-19 vaccine could receive emergency use authorisation in December
-US building permits hit highest since 2007 in housing boom
-EU receives 150 billion euros in demand for first SURE bond sale

-Bitcoin breaks out above $12,000
-Copper reaches 2-year high (> $3.16 per lb)
-EUR/USD breaks out to 1-month high (1.184)

DAY AHEAD
Tesla earnings
Tesla stock has been sliding heading into the results – showing a distinct lack of the usual optimism about the company’s future at the cutting edge of EVs. The stock fell back from a 6-week high amid a broad sell-off in equity markets. As of Tuesday morning it was down four days in a row – its longest losing streak since March. That leaves the stock 15% below its record high – right in between technical correction and bear market territory.

We don’t think Tesla guiding its full year vehicle sales estimate lower would be enough to derail enthusiasm for Tesla because it’s a function of the pandemic. The bigger issue is the order book- and whether the global recession has tugged demand for Teslas lower. We know already that Tesla delivered 124,100 Model 3 and Model Y vehicles in the third quarter when capacity is for 150,000. Whether the stock gives up some of its huge yearly gains or makes new records could rest with whether it was supply or demand that caused that Q3 delivery shortfall.

UK consumer price index (CPI)
The Bank of England will keep interest rates pressed to the floor, which means CPI has little bearing on UK benchmark rates- and thus likely have a limited impact on GBP. A small uptick in both headline and core inflation is expected but that’s from a low base. EU/UK trade negotiations remain the biggest driver for Sterling. On that front, the can has been kicked down the road until early November when (surely) a solution will be found.