US equities began the week on a positive note, with technology shares rallying after a positive upgrade by Morgan Stanley analysts for Tesla shares.
United States
Shares in Tesla surged 10.09% overnight after Morgan Stanley analysts upgraded the stock to “overweight” and raised their 12-month price target to $400 from $250 previously. The upgrade is based on the potential for Tesla’s Doho supercomputer, used for training automated driving systems which the analysts believe can add $500 billion to enterprise value. The S&P500 rose 0.67% along with the Dow Jones 0.25%, Nasdaq Composite 1.14% and Russell 2000 0.19% with the -0.29% lower at 13.80. Also boosting sentiment was the latest article from Nick Timiraos of the Wall Street Journal, known for helping communicate the Federal Reserve’s intentions. The main point of the article highlighted Fed officials were now more cautious about raising rates too high amid easing inflation pressures, with a rate pause in September giving officials more time to assess data. Probabilities based on Fed Fund futures suggest just a 7% chance of a rate increase in September, with a 37% chance of a further 0.25% by November, with rate cuts still priced in from mid to late 2024.
TSLA Share Price
According to a survey by the Federal Reserve Bank of New York, consumer inflation expectations were stable in August, although households remained concerned about their finances and were more pessimistic about the labour market. Median one-year ahead inflation expectations were modestly higher at 3.6% from 3.5% in July, while on a three-year horizon, expectations declined to 2.8% from 2.9%. The survey comes ahead of the release of official CPI data on Wednesday for August, expected to show core prices rose 0.2% over the month, while headline prices rose 0.6% driven by higher energy costs. Respondents also said they believed the unemployment rate would be higher in a year from now and noted they were concerned about their ability to access credit, with the share of households saying it is harder to access credit now at the highest levels since June 2013 when the survey began.
Europe
European equities also began the week on a positive note, seemingly buoyed by better-than-expected China new yuan loan data and comments from US Treasury Secretary Janet Yellen that she was increasingly confident the US will contain inflation without major damage to the economy. The Euro Stoxx 600 rose 0.34% along with the DAX 0.36%, CAC 0.52% and FTSE100 0.25%. In focus tonight is the release of UK employment data for July, expected to show a modest increase in the unemployment rate to 4.3% from 4.2% previously. ZEW economic sentiment surveys for September for both the Eurozone and Germany are also due to be released, expected to show a decline in sentiment.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX is expected to edge higher this morning with ASX200 futures up by 7 points or 0.10% to 7,199. The index finished 0.5% higher on Monday driven by gains in financials and materials, both of which rose 1.27% and 0.58% respectively, supporting materials was a 3.55% increase in iron ore futures in Singapore. Also supporting sentiment was better-than-expected new yuan loan data from China in August, rising to CNY1360B from CNY345.9B previously and surpassing estimates of CNY1200B suggesting that recent steps by policymakers are beginning to take effect. That helped lift the Australian dollar which rise 0.86% against the USD to 0.6431 ahead of the Westpac consumer confidence survey for September due to be released at 10:30 AEDT this morning and NAB business confidence for August at 11:30 AEDT.
Commodities
Oil prices were modestly lower overnight with WTI crude down -0.25% to US$87.29 and Brent crude little changed at US$90.64 a barrel. Iron ore futures are 0.21% higher this morning at US$117.60 while copper futures in the US gained 2.43% overnight. A weaker USD helped boost precious metals with spot gold 0.17% higher at US$1,922 an oz with silver also 0.66% higher at US$23.08 an oz.
Economic Calendar
12th September 2023
Australian Consumer Confidence (MoM Sep) 10:30
Australian Business Confidence (MoM Aug) 11:30
UK Employment (MoM Jul) 16:00
Eurozone Economic Sentiment (MoM Sep) 19:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
