Weekly Market Update - 8 April 2024
Biden-Xi Call
US President Joe Biden and Chinese leader Xi Jinping spoke by phone Tuesday, their first one-on-one communication since meeting in California last November. The leaders have managed to maintain a veneer of diplomatic stability despite deep mutual suspicion between their nations and as their governments pursue export controls, sanctions and tariffs. At the same time, they have sought common ground on issues including risks posed by artificial intelligence and combating illicit drugs like fentanyl. Also discussed was the push for TikTok’s divestment. Biden reiterated concerns about Chinese ownership of the app. Meanwhile, US Treasury Secretary Janet Yellen will travel to China for the second time in nine months this week to press her counterparts on a build-up of industrial overcapacity that poses threats to the global economy. Yellen will spend two days in the southern commercial and manufacturing hub of Guangzhou beginning April 5 before heading to Beijing for two more days of talks.
Source: Bloomberg
Swiss Franc
Traders are turning to the Swiss franc as the top choice for funding carry trades instead of the yen. The franc has plunged since Switzerland’s central bank unexpectedly cut rates last month, leading both State Street Global Advisors and Citigroup to see it as the prime candidate for carry traders. With the Bank of Japan making a historic move the other way to lift rates, both are also betting the yen will gain ground against the franc. The pivot to using the franc for carry trades — a strategy of borrowing in low-yielding currencies to fund positions in higher-yielding ones — could ease stress in the yen. While its decline has slowed since the March BOJ rate hike, the yen slipped to a 34-year low last week and flirted with a 152-per-dollar level that many say would force Japanese authorities to intervene. Options traders are also betting 152 or 153 will be a line in the sand.
Source: Bloomberg
Disappointment
Tesla had Wall Street analysts second-guessing their models as the first quarter came to a close. One after another reduced their estimate for vehicle deliveries. They didn’t cut by nearly enough. The electric-car maker delivered just 386,810 vehicles in the first three months of 2024, missing Bloomberg’s average estimate by the biggest margin ever in data going back seven years. A myriad of red flags went up throughout the quarter. First, Tesla warned its rate of growth will be “notably lower” this year, blaming rate hikes that have kept its cars out of reach for many consumers even amid price cuts. The company dealt with multiple disruptions at its plant outside Berlin. Elon Musk drew attention for his posts on X, turning off some prospective buyers, and China’s EV market grew even more cut-throat. Despite all that, many still expected Tesla to sell more vehicles than a year earlier. Instead, deliveries dropped 8.5%.
Source: Bloomberg