Tesla stock split & GBP slides

Stocks rise as the first peace talks in two weeks raise some hopes of a cease-fire, and despite German consumer sentiment plummeting.

• Oil extends losses ahead of peace talks and as Shanghai remains locked down
• GBP/USD slides under 1.32 after BOE Gov Bailey warns of a slowdown
• Tesla announces stock split to be paid as a dividend 

European stocks are pointing to a stronger start after a positive end to trading on Wall Street. US indices rose for a third straight session, boosted by tech stocks, overcoming recession fears, and news that peace negotiators experienced symptoms of chemical poisoning after meeting in Kyiv at the start of the month.

Geopolitical headlines will remain in focus as the latest round of Russia, Ukraine peace talks resume in Tukey today. These will be the first talks in two weeks.

The Nasdaq outperformed its peers in the US, jumping 1.6%, helped by Tesla’s plans for a stock split. The company said the stock split would be enacted in the form of a stock dividend. 

Traders brushed off a warning from the bond market that a recession could be coming as the 5-year and 30-year treasury yields inverted for the first time since 2006.

Oil 

Oil prices fell 7% at the start of the week and are extending losses on Tuesday, ahead of peace talks, amid ongoing concerns over fuel demand in China as Shanghai remains in a 9-day partial lockdown. 

While there have been few tangible signs of progress in peace talks so far, any hints that negotiations are advancing could see oil prices come under further pressure, which would help ease inflation fears.

German consumer confidence

The rising cost of living is hurting consumer sentiment, which is now showing clearly in the data. German GFK consumer confidence plunged to -15.5 in April, down from -8.5 in March, and worse than the -12 that was expected. The fallout from the Ukraine war has pushed German consumer morale to the lowest level since February 2021. Surging energy prices and rising uncertainty amid the ongoing sanctions suggest that the only way for confidence to increase significantly would be a ceasefire in Ukraine.

The DAX is set to open 0.7% higher, after booking gains of 0.8% in the previous session. 14800 is a key resistance level which the DAX last traded above on February 21st, are Russia’s invasion.

Coming up

US Fed speakers will continue to hit the airwave after hawkish commentary last week. US JOLTS job openings data is also due to show continued tightness in the US jobs market with over 11 million vacancies, around 6 million more than the number of unemployed at the start of the year.

FX

In the FX markets, GBP/USD continues to trade below 1.32, falling 0.8% at the start of the week after BoE Governor Andrew Bailey warned that signs of an economic slowdown were already starting to show and that the inflation shock would continue. The BoE will release its quarterly bulletin today, which will be scrutinized closely as the central bank continues to raise interest rates.

USD/JPY is falling away from 6-year lows on profit-taking after rallying to a high of 125.11 in the previous session after the BoJ intervened and announced unlimited bond purchases to defend the yield curve. The move highlighted central bank divergence, as the Fed looks set to hike rates six times more across the year.