Tesla pops after results, Russian missiles, French elections in focus

European bourses point to a firmer open, extending solid gains from the previous session, with central bankers in focus and despite Putin firing warning shots.

• Tesla impresses with earnings driving past expectations
• Stocks rise with Russian test-fire & French elections in focus
• EZ CPI data, Christine Lagarde, Andrew Bailey, and Jerome Powell are due to speak

Stocks across Europe and the US, except the Nasdaq, were helped higher yesterday by falling yields amid optimism that inflation would peak this quarter and start easing lower.

This could well be the case in the US, which has more diverse energy sources than Europe and is more self-sufficient as far as food is concerned; this seems unlikely in Europe when the German PPI jumped to 30.9%, the highest level since records began 73 years ago. Higher inflation at the factory gate often pushes into consumer prices, suggesting that consumer inflation in the eurozone will likely push higher.

The Nasdaq was the lone decliner after the Netflix horror show saw the share price plunge 35%, raising concerns over earning season for other big tech pandemic plays. That said, impressive numbers from Tesla after the close have helped restore some confidence in earnings season.


Tesla

Tesla’s profits surged in Q1 despite higher costs. The EV maker posted earnings of $3.3 billion, and deliveries were up 68% in a very challenging environment when prices were rising, supply chain disruptions continued, and the Shanghai factory closed for COVID. Even so, Tesla managed to pass on the higher costs to the customer, and the higher price hasn’t dented demand for the product. The stock trades 4% higher pre-market.


European politics

Today European bourses are rising as investors brush off news that Putin test-fired an intercontinental missile with nuclear capabilities. The move is undoubtedly a warning to allies and raises the prospect of a nuclear escalation in the war. Still, at this stage, investors remain unfazed.

A strong performance from Macron against Marine Le Pen in the French Presidential election debate is helping to buoy the mood in the market. The race remains tight ahead of Sunday’s vote.

The CAC pushed over the 50 sma yesterday and is building on those gains towards 6700.


CPI, central bankers

Attention will now turn to Eurozone CPI data, the final reading for March, which is expected to confirm the preliminary print to 7.5%. Hot inflation is drawing out the hawkish ECB members, with Kazaks saying that the central bank could look to raise interest rates as soon as July.

EUR/USD jumped 0.6% yesterday following the German PPI print, Kazaks comments and Macron’s performance. Today the pair is holding steady ahead of a speech from ECB President Christine Lagarde. Her comments will be scrutinized for clues over future monetary policy.

In addition to Christine Lagarde, the BoE’s Andrew Bailey is due to speak, and the Federal Reserve’s Jerome Powell later in the session. Ahead of Powell’s speech, the CME Fed Funds are pricing in a 93% probability of a 50 basis point interest rate rise in May. A hawkish-sounding Powell could cement the likelihood of an outsized raise, lifting the USD and potentially pulling non-yielding gold lower.