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Tesla Beat, ECB Rate Hike Talk, Jobless Claims – What’s Moving Markets

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By Geoffrey Smith — The euro surges as officials put a July rate hike back on the agenda. Jerome Powell and Christine Lagarde both speak on the sidelines of the IMF meeting later. Tesla (NASDAQ:TSLA) beats earnings expectations, but raises a few eyebrows in the process. United Airlines (NASDAQ:UAL) forecasts good times ahead, but Equifax (NYSE:EFX) is downbeat about the outlook for the mortgage credit market. Russia declares ‘victory’ over a city where Ukrainian forces are still fighting, a day after it defaulted on a dollar bond payment due to the lack of cooperation from its U.S. bankers. AT&T (NYSE:T) results, jobless claims and the Philly Fed business survey are due. Here’s what you need to know in financial markets on Thursday, 21st April.

1. Tesla’s earnings blow past expectations, raise eyebrows

Tesla reported another stronger-than-expected quarter in the three months through March, with a net profit of $3.32 billion. That included a $679 million contribution from regulatory emissions credits, but an operating profit of $3.6 billion indicated solid underlying momentum in its core business.

CEO Elon Musk said the group should be able to produce over 1.5 million cars this year, despite challenges from a three-week shutdown at Shanghai that only ended earlier this week.

Some cast doubt on the group’s accounting, suggesting that Tesla either wasn’t recognizing steep input price inflation or faced a big jump in costs in coming quarters. The company reported a 15% increase in operating expenditure, but an 80% rise in revenue. The disparity may lie partially in the company using up raw material inventories that were bought before prices for inputs such as battery metals went through the roof earlier this year.

Tesla stock rose over 7% in premarket trading, more than reversing Wednesday’s declines.

2. ECB officials put July rate hike in play

The euro rose to its highest in over a week after Vice President Luis de Guindos joined a chorus of European Central Bank officials acknowledging the possibility of a rate increase in July. That would be the bank’s first in 12 years, and represents a significant shift after President Christine Lagarde soft-pedaled the outlook for tightening policy at her press conference last week.

Lagarde and Federal Reserve Chairman Jerome Powell both speak on the sidelines of the International Monetary Fund’s spring meeting later, an event that has gathered the world’s central bankers at a time when inflation is running amok globally.

By 6:15 AM ET (1015 GMT), the euro was at $1.0915, up 0.6% on the day and just off its intraday high.

3. Stocks set to open higher; United soars, Equifax slumps

U.S. stock markets are set to open higher later, with Tesla’s well-received earnings helping to calm the fears stoked by Netflix’s results on Tuesday. 

By 6:20 AM ET, Dow Jones futures were up 208 points, or 0.6%, while S&P 500 futures were up 0.8% and Nasdaq 100 futures were up 1.1%. The Nasdaq had underperformed sharply on Wednesday, due to the heavy weighting of Netflix (NASDAQ:NFLX), which suffered its biggest one-day drop in 18 years. Netflix stock fell another 1.2% in premarket trading.

Stocks likely to be in focus later include United Airlines, which reported upbeat guidance after the bell on Wednesday despite showing another big quarterly loss, and Equifax, which fell nearly 10% in after-hours trading after forecasting a sharp slowdown in mortgage credit inquiries over the rest of the year.

AT&T dominates the early reporters, along with Danaher (NYSE:DHR), NextEra Energy (NYSE:NEE), Philip Morris (NYSE:PM), American Airlines (NASDAQ:AAL) and Union Pacific (NYSE:UNP), while Swiss giant Nestle (OTC:NSRGY) already reported a thumping 7.6% rise in first-quarter sales, over 5% of which was due to price increases.

4. Jobless claims, Philly Fed survey due

The number of people making initial claims for jobless benefits is expected to stay close to 60-year lows at 8:30 AM ET, a reflection of the continuing tightness of the U.S. labor market. Analysts expect initial claims to tick back down to 180,000 after last week’s increase to 185,000. Continuing claims are expected to grind lower to 1.455 million, a drop of 20,000.

The numbers will be released at the same time as the Philadelphia Federal Reserve’s monthly manufacturing survey, which is expected to show a slight cooling of activity from February.

Of more interest than either may be the auction of inflation-protected 5-year Treasury notes at 1 PM ET. The last auction sold at an average yield of -1.508%. That’s unlikely to be repeated given the sharp rise in real bond yields in recent weeks.

5. Russia declares ‘victory’ in Mariupol

Russian President Vladimir Putin declared victory in the country’s battle for the Ukrainian city of Mariupol, even though elements of the defending forces continue to fight on. Putin told Defense Minister Sergey Shoigu in a choreographed video clip that Russian forces should rather conserve lives than storm the remaining Ukrainian positions in the Azovstal steel mill.

Putin’s comments come a week after the loss of the Black Sea Fleet’s flagship Moskva. Moscow’s failure to account for a crew that it says was fully evacuated prior to the sinking has revived long-standing suspicions of the state’s disregard for its servicemen.

Russia was declared in potential default on Wednesday by an international committee overseeing credit derivatives. However, the failure to pay occurred because the western banks acting as payment agents refused to handle Russia’s dollars, rather than because Russia had chosen not to pay. Separately, Bloomberg reported that Russia’s oil output fell to its lowest this year last week amid increasing practical problems in getting its product to willing buyers.

Tesla Beat, ECB Rate Hike Talk, Jobless Claims – What’s Moving Markets

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