Our head of investment rounds up the morning's big news.
European markets have opened higher following a very strong session overnight in Asia, with the Nikkei and Hang Seng up by over 1.5% and 2% respectively on the first trading day of the second half of 2023.
Oil giants Shell (LSE:SHEL) and BP (LSE:BP.) as well as financial stocks like NatWest Group (LSE:NWG)t, Barclays (LSE:BARC) and Lloyds Banking Group (LSE:LLOY) are among the top performers on the UK blue-chip index, while AstraZeneca (LSE:AZN) is at the bottom of the leaderboard.
The FTSE 100 was the sharp underperformer in H1, higher by 1% versus the DAX up almost 16% and the CAC up 14%, as investors continue to take a cautious stance towards the UK. Meanwhile, the Nasdaq Composite enjoyed its best first half since 1983, while Apple Inc (NASDAQ:AAPL) reached a $3 trillion market cap.
Tuesday looks set to be a quieter than normal for trading given the US 4th July holiday. But all eyes will be on the non-farm payrolls report on Friday for clues as to the strength of the US labour market and the potential inflationary fallout stateside.
Tesla Inc (NASDAQ:TSLA) reported record vehicle deliveries between April and June of 446,140 cars, beating analysts’ expectations for 445,000. The figure was up 83% year-on-year and 10% versus the previous quarter.
The electric vehicle giant has benefitted from US federal credits which are designed to encourage consumers to shift away from diesel and petrol cars. Its strategy to cut prices this year has also paid off amid the macroeconomic headwinds, but could weigh on profit margins ahead. In response to the strong update, Canaccord Genuity raised its target price on the stock from $257 to $293 in a further vote of confidence.
Tesla appears to be prioritising market share growth over profit margins by lowering prices to boost deliveries in response to the weaker demand backdrop. However, stiff global competition remains particularly from the Chinese automakers such as BYD.
Tesla enjoyed a blockbuster first half share price performance and is rallying again this morning in Frankfurt. It was among a handful of tech names alongside NVIDIA Corp (NASDAQ:NVDA) and Meta Platforms Inc Class A (NASDAQ:META) which surged more than 100% in the first six months of 2023.
The stock was heavily punished last year amid the ‘tech wreck’ on the back of rising inflation and interest rates which hurt the growth sector. But investors have been piling back into tech this year as US inflation shows signs of cooling. There is also growing excitement towards the potential growth of Tesla’s proprietary charging network which is being opened up to rival automakers. Focus now shifts to its second quarter results on 19 July.
The chairman of Tate & Lyle (LSE:TATE) and Burberry Group (LSE:BRBY), Gerry Murphy will be appointed as Tesco (LSE:TSCO)’s next chair from 1 September. He will replace John Allan who resigned last month amid allegations of inappropriate behaviour.
Murphy will step down from Tate & Lyle after over six years in the job as he moves to the UK’s biggest supermarket. He boasts a wealth of experience in UK consumer businesses and is a well-known voice in the British press on related matters. Tesco’s interim chair Bryon Grote said Murphy was the ‘unanimous choice.’
Last month, Tesco’s CEO Ken Murphy said inflation remains ‘stubbornly high’ but it is past the peak, while the supermarket reported an 8.2% jump in quarterly sales to £14.8 billion. Critics have argued that supermarkets and consumer goods giants have been ‘profiteering’ from food inflation as businesses pass on additional cost pressures to consumers in terms of higher prices.
However, on Friday, Tesco cut prices for the second time in a number of weeks, lowering over 500 items in price in an attempt to attract customers amid the cost-of-living crisis and the increased price sensitivity among consumers. The goal is also for Tesco to preserve its dominant market share despite growing competition from the fiercely price competitive German discounters, Aldi and Lidl.
Shares in Tesco are up around 9% so far this year, outperforming the FTSE 100 but are underperforming rival Sainsbury (J) (LSE:SBRY) in percentage terms.
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