US markets fell as US ISM manufacturing index edged up to 47.7 in February. While the index indicated a contraction of factory activity, ISM prices paid for materials rose for the second straight month indicating that input prices continue to remain high. US 10-year yield rose to 4% as the risk of more interest rate hikes looms with inflation risks still unabated.
Markets are now pricing in a higher probability of a terminal rate of 5.5% in September which implies at least 3 more 25 basis point rate hikes. This comes after US consumer prices rose by 0.5% m-o-m in January because of the continued tight labor market and certain sticky factors within the inflation basket such as rents and food. Furthermore, tensions between Russia and Ukraine have also further escalated since the start of the year. $S&P 500(.SPX)$ fell by -0.5% while $NASDAQ(.IXIC)$ fell -0.7% overnight.
China will kick off its annual National People’s Congress this weekend, right off the heels since it lifted its pandemic policies at the start of the year. It is expected that there would be new leadership movements with Li Qiang expected to become the premier while He Lifeng is poised to become the new vice-premier. The People’s Bank of China Governor Yi Gang is also expected to relinquish his position to Zhu Hexin.
With the new leadership, the government under Xi’s 3rd term is expected to shore up economic growth which had been challenged by a plethora of factors from a property credit crisis, regulatory tightening, and the doldrums of the pandemic. We could expect more targeted policies to bring stability back to the real estate industry and improve domestic consumption as well as private investments.
$Tesla Motors(TSLA)$ held its 2023 Investor Day as it shared more details of its “Master Plan 3” which was centered on lowering costs, scaling production amid the competition landscape. Investors who anticipated more a meaningful breakthrough in terms of a new Tesla vehicle or services, came away disappointed. Tesla targets to have ten vehicle models to reach 20 million production by 2030. It also confirmed Gigafactory Mexico which is based on its next generation platform with the potential of reducing costs by 50%.
The company also revealed its Optimus humanoid robot during the presentation which Elon has visioned to be bigger than the vehicle segment in the long run. Shares of Tesla have recovered impressively by over 64.6% year to date, after deliveries concerns and Musk’s acquisition of Twitter last year. Tesla is currently trading at 51x/36x of FY2023/24 price-to-earnings ratio.
Comments