Morning Bid: Oil smudges inflation view, Tesla in slow lane

By Thomson Reuters Mar 14, 2024 | 5:01 AM

A look at the day ahead in U.S. and global markets from Mike Dolan

Creeping oil prices are complicating the inflation picture again, with producer inputs and retail sales updates next on the U.S. economy’s dashboard on Thursday – while Tesla drifts further from the megacap stock vanguard.

As thoughts of U.S. recession recede further, oil prices climbed again on Thursday after data showed U.S. gasoline stocks fell for the sixth straight week to three-month lows and crude stockpiles dropped unexpectedly.

With global supply concerns also jarred this week by Ukrainian attacks on Russian refineries, U.S. crude rose back above $80 per barrel, close to the year’s high and pushing year-on-year to 12% – the fastest pace since September.

Rising fuel prices were partly responsible for stickier consumer price readings for February earlier this week and the producer price report for last month is due out later – important for many economists as it contains key components in the Federal Reserve’s favored PCE inflation gauge.

Annual headline PPI inflation is expected to tick back up to still-subdued 1.1% during the month, although “core” rates are forecast to fall back below 2.0%. A retail sales readout for February and weekly jobless numbers are also on the diary.

With next week’s Fed meeting now on the radar, futures pricing for a June interest rate cut edged lower. And despite a decent 30-year Treasury bond auction on Wednesday, Treasury yields nudged higher.

Curiously, Treasury market volatility swooned however and the MOVE index fell to its lowest since September.

Wall St stocks stalled again on Wednesday after the prior session’s surge, although stock futures were firmer into the latest screed of economic updates.

Tesla’s ongoing drift lower did grab more attention, however, as the electric vehicle giant’s stock separated further from the fortunes of the so-called Magnificent Seven of megacaps it’s supposed to be part of.

Down yet again ahead of Thursday’s bell and off 2% on Wednesday, it’s now lost more than 30% for the year so far and hit a 10-month low.

Battling a global slowdown in EV demand following last year’s price war that hurt margins, it has lost nearly $200 billion in market value this year. Wells Fargo on Wednesday raised concerns over the waning impact of Tesla price cuts on demand for its EVs and downgraded the stock to “underweight”.

Elsewhere, investors were parsing the impact of Wednesday’s vote in U.S. House of Representatives that overwhelmingly passed a bill giving TikTok’s Chinese owner ByteDance about six months to divest the U.S. assets of the short-video app, or face a ban.

The bill passed 352-65 in a bipartisan vote, but it faces a more uncertain path in the Senate where some favor a different approach to regulating foreign-owned apps posing security concerns.

It is unclear whether China would approve any sale or if TikTok’s U.S. assets could be divested in six months. If ByteDance failed to do so, app stores operated by Apple, Alphabet’s Google and others could not legally offer TikTok or provide web hosting services to ByteDance-controlled applications.

A ban may also have implications for President Joe Biden’s re-election campaign.

China stocks ended lower on Thursday, led by declines in gaming and semiconductor stocks while Hong Kong shares fell, dragged by Wuxi Apptec, as concerns over geopolitical risks persisted.

In Europe, German container shipper Hapag-Lloyd fell 1% after it posted an 83% decline in net profit for 2023, and cut its dividend by 85% in what it called a challenging market environment. Global vessel oversupply and a crisis in the Red Sea forced it to cut expenses in 2024 and could reduce sailings.

In currency markets, the dollar was steady – largely trapped ahead of next week’s big central bank meetings.

Key diary items that may provide direction to U.S. markets later on Thursday:

* U.S. Feb producer price index, Feb retail sales, weekly jobless claims, Jan retail/business inventories; Canada Jan manufacturing sales

* European Central Bank Vice Luis de Guindos and board members Isabel Schnabel and Frank Elderson all speak.

* U.S. Treasury auctions 4-week bills

* U.S. corp earnings: Adobe, Dollar General, Ulta Beauty

(By Mike Dolan, editing by XXXX mike.dolan@thomsonreuters.com)