UK COVID Cases Could Hit 100k & Tesla ($TSLA) Fall Post Earnings

Okay, it is Thursday, 21st of October. Hope you're doing well. So in the briefing today, I'm going to talk about a couple things to do with the Fed. We had the Beige Book last night, a couple of Fed comments to be aware of, and then the US politics, an update on the US reconciliation bill. And then we're also going to talk about earnings. We had IBM, who moved sharply lower, over 4% down after market post-earnings, and Tesla, despite top and bottom line beats, actually were down around 1.6%. 6% after market last night. So US corporate earnings we'll also talk about. And then in the UK, a warning from the UK Health Secretary yesterday about potential for rising COVID cases that could get to 100,000. We're about halfway at that figure at this present point in time. And then we'll talk about Bitcoin, all-time highs yesterday. The Valkyrie Bitcoin ETF due to be trading as of Friday, the second one. This comes now as total assets under the initial ProShares one, which was launched this week week has now topped $1.1 billion. And then we'll look at China. Evergrande were down, no surprise, another 14% or so overnight after a failed spin-off of one of their units, the property services division. And so we'll have a look at that as well and then look at the day ahead. So that's what's on the agenda. But having a quick look in the flavor of the charts this morning and general market sentiment, so overall on Wall Street we had a slightly positive close, up around 0.4% in the likes of the S&P and Dow. The NASDAQ, though, did slip ever so slightly, down 0.05%. And overnight in the Asia-Pac session, we've kind of just drifted a little bit from those more elevated levels. So stock futures, US and European, seen lower this morning. The NASDAQ down about 50 points, S&P 11, and the DAX about 65 as we speak. As such, T-notes have just been coming up off their lower levels during the APAC session, albeit still down 3 ticks, but above the pivot level in the futures. Gold pretty much top right here, locked in a short-term period of consolidation, really just looking at some of yesterday's price activity. So downside 1782, up to the high that was seen in the middle of the APAC session at 1790.5. Currency-wise, the dollar is pretty flat overall, and that's largely reflected in the major pairs, both EURUSD and Cable down just a slight margin of 15 pips or so. And cable finding some upside resistance, as you can see here, both at the latter part of the US session, overnight in the Asia-Pac session, which was the high that we had around midday printed 2 days ago, uh, earlier this week. So a bit of upside resistance there to watch at 138.33 in the futures market. Oil had a good run obviously yesterday, managed to retest up around on those longer time frame charts that key $84 handle. Still providing that cap, which we've spoken about in briefings many times before. And so just moderating off that initial push that we saw through the US session, which really handed on the baton to Asia, which lifted it even further. And so we've just had a bit of a pullback now to strategically an area of support around 8316, which you can see was this previous high that we had back at the beginning of the week. Also the high that we saw in yesterday's session before the break, which acted as a nice kind of linchpin or inflection point for a previous resistance to the breakout pullback for that, then push on to $84. And we're trading back at that mark at the moment. So not too much in the way of any specific headlines oil-related, just more price action technicals at work at this point in time. So straight to it, let's talk about a couple of headlines then, get you up to speed on, uh, the Beige Book is not something that typically really unveils too much in a way of new radical detail that would mean market participants would shift their view on the Fed. But nonetheless, it's a good thing to just keep a half an eye on to get that kind of temperature check on a regional level. So this is generally distributed then amongst the 12 reserve districts in the US, and it gives us an idea about how these kind of micro-area economies are performing to get a bit more of a flavor for the, the national feeling in the US. And the US economy expanded at a, quote, modest to moderate rate. While some districts noted growth slowed, citing supply constraints and concerns over the Delta variant, as according to the Beige Book. And they said price pressures were driven by supply shortages, transportation bottlenecks, and labor constraints. So yeah, um, all interesting, but yeah, nothing really new to spin a different direction in terms of expectations are concerned. A couple of Fed comments, and I'd say it probably fits the same similar conclusion. So Fed voter Quarles said he favors an initial move to slow monetary stimulus next month. So this idea of tapering very much priced in for November announcement and is concerned by a broadening of inflation pressures that could require a policy response. So absolutely in fitting with expectations. Meanwhile, non-voter and hawk— this isn't actually Mester, this is a talking head, by the way— Mester said that interest rate hikes are not coming anytime soon. As asset purchases wind down, we have some time to assess inflation and employment. And it's quite interesting because this week, Mester typically has had a history of sitting more on the hawkish side of the policy spectrum, and it's the hawks that have come out and been very clear to disassociate rate hikes from tapering. So I think that's quite tactical on behalf of the Fed as we get closer to that taper trigger being pulled, whereas Quarles was more the center ground members of the, the FOMC tend to be towing the more kind of neutral commentary at this point in time. The US reconciliation bill, what's the latest there? Well, White House has told Democratic lawmakers in a meeting yesterday that a proposed hike in corporate taxes is unlikely to make it into the final reconciliation bill, according to congressional source familiar with the discussions. And so this of course comes as with a few months ago Biden was looking to push that Trump-era slashing of corporate tax rates back up. But in order to get this deal over the line, it's looking like that might not ever materialize. So that's the latest on those talks. And then quick look, just wrapping up the kind of US region, we did have some earnings last night. IBM Q3 operating EPS actually missed estimates by a penny. Revenue $17.62 billion was also a miss on expectations of $17.83 billion. And as such, then, quite a sharp negative reaction we've seen in aftermarket trading. IBM shares, as you can see here, falling down to around the $135 mark, so a loss of 4.25%. And then Tesla, Overall, not too bad on the numbers. Their adjusted EPS $1.86 was against $1.67. Revenues $13.76 billion perhaps were a little bit soft. Um, their gross margin ex-environmental credits was also actually up. It rose to 28.8% from 25.8% from the prior quarter, coming of course despite cost pressures from supply chain issues that they've been experiencing, as all auto manufacturers have. But I guess it's a case of, you know, if you were actually to look at the Tesla chart just for a moment, I mean, Tesla have been seeing a really quite aggressive rally specifically this week. I'm just going to have a quick look here to give you some percentages. Just bear with me one second. So to give you a bit of context, from August to basically this week, Tesla are up from August 35% in this week alone. Or going back to, uh, yeah, the end of last week, because we had a bit of a rally on Friday last week. So from this time last week, we're up around 7%. So the fact that we've come off 1.5% on better than expected earnings, I think, is no great deal or big deal, to be honest. The stock has been tearing higher. So although it's a bit contradictory, the numbers to the move, I think the rationale is by the stock price performance that we've had going into the earnings report more than anything else. So Tesla, as you can see here, just kind of drip fed lower after some initial volatility after the earnings came out last night. Okay, quick look at then at the UK. Um, we had the Health Secretary, Sajid Javid, put out a warning yesterday that COVID cases could hit 100,000 a day. And this comes after we're seeing continued uptick in the case rate of COVID-19 in the UK, specifically in the demographic of 12 to 17-year-olds, which is this rush at the moment to try and get high school kids vaccinated. But there's been lots of logistical issues given that start— schools are generally understaffed anyway, and now they've got this extra burden of trying to roll out this very large-scale program. And of course, that's running into some complications in terms of the, um, kind of administration of that process. And so case rates are moving higher, and we've heard this before, even from, um, Sajid Javid himself, but others, about this 100K number whether or not that materialized, yet to be seen. We continue to monitor the trajectory of these case rates at the moment, and obviously it comes at a point which is slightly concerning of efficacy rates generally waning over time. And at the moment, the booster rollout is still happening for the older and more vulnerable, and so it hasn't yet started to filter down the other key categories, of which there were 9 in the original rollout, going from kind of generally age order downward. He did confirm that England would not yet move to the government's Plan B for dealing with pressures on hospitals this winter. So obviously seasonally kind of twofold from the COVID transmission point of view, more congregation inside generally then might help spread the virus in that sense, but then also the fact that normal seasonal flu tends to see hospitals under more strain anyway from a seasonal perspective as the weather changes, but then heaping on top of that the COVID situation, hence some of these warnings that are being sounded at the moment. To give you an idea, we had just under 50,000 new COVID cases yesterday. It's the 8th day in a row the infections have been above 40K. Death-wise, the toll was at 179. To give you an idea about the government's Plan B, Contingency measures would include the reintroduction and legal requirement to wear face coverings in some settings. And I would say that's somewhat of the political hot potato, um, because that, that's almost been politicized, the face mask specifically tied to people's freedom and so on. So real tricky one for the government to manage if they were going to go down that route, um, in terms of their political perception and popularity. Then there's the potential introduction of COVID vaccine passports and the possible return of the work from home command. So at the moment, yeah, this hasn't really impacted sterling, I would say, but it's something to, to continue to monitor because if we start to do the whole work from home thing, then we need to start recalibrating the kind of mobility impact that that would have then consequently on economic activity, as we've seen before. And obviously at the moment we're still trying to calculate whether or not the Bank of England can pull the trigger on hiking rates. And if you listen to GS and Credit Suisse and other banks, as soon as November, as I've said before, you know, for these reasons amongst others is why I see that being an unlikely event. But we shall see. Bitcoin, the Valerie or Valkyrie Bitcoin strategy fund will begin trading on the Nasdaq exchange on Friday. The fund is going to follow, of course, the successful launch of the ProShares Bitcoin Strategy ETF, or BITO, the ticker symbol, which has accumulated more than $1.1 billion in assets in just 2 days of trading. And that continues to see Bitcoin plug away on the upside and printed fresh all-time highs at $67K yesterday. It has come off a little bit. The futures market was trading up as high as $67,500 yesterday, and we're trading around $64,700 at the moment. And then China, just finally, Evergrande. I don't think necessarily this is— this now causes the same effect that it would have done 10 8, 10 weeks ago. This headline back then would have kind of created a negative spiral of sentiment, translating into Chinese negative close and a general softer footing for the European Open. But that ship has sailed now. I think people have kind of acclimatized to the Evergrande situation. So even though they were down as much as 14% overnight after the company resumed trading after a 2-day halt last night, after the Chinese real estate developer disclosed a plan to sell its property services division, had essentially collapsed. And so just more issues there, um, as debt repayment deadlines continue to loom for the property developer and how that will be solved. But, um, I guess at the moment, the continued commitment from the Chinese Central Bank, it looks like, to do what is necessary for the time being, with the fact that the market seems to hope now be a little bit more educated, so less spooked by this situation. And fears of contagion certainly have been, if not dissipated, or eliminated, if not dissipated, to a degree where it's not really such a big issue at this point in time, albeit still something to monitor. Um, looking at the calendar for the day ahead, pretty quiet for the UK European morning, nothing really of note for me to mention until we get into the US afternoon. We've got the weekly US jobless claims alongside the Philly Fed Business Index. That will come at 1:30. You've got US existing home sales alongside the European consumer confidence flash reading for October at 3 PM. Fed Speaker Waller, a voter, speaking at a virtual event at 2 PM this afternoon, London time. Supply coming out of Spain and France. And then you've got a 2.5, 7-year note and 2-year floating rate note announcement from the US Treasury at 4. Alongside a $19 billion 5-year TIPS auction. Earnings, the kind of main ones to look out for today, you've got AT&T and Intel as well as American Airlines, Southwest Airlines in the US. And then in Europe, you've got the likes of Barclays, Unilever, Vivendi, L'Oréal, probably some of the bigger market cap names if you're looking at single stock news flow. All right, that is it. I'll let you get on with the day. Hopefully that was useful. Uh, any questions at all, feel free to drop me a comment. Happy to help. Otherwise, I will see you guys same time tomorrow. Thanks very much.