For the first time in the company’s history, Tesla’s profit topped 1 billion USD. At the same time, the sales almost doubled even though the car industry, in general, had suffered from a chip shortage. The company reported in Q2 it earned $1.14 billion ($1.02 per share). Compared with $104 million, or 10 cents a share over the same period year ago the result is magnificent. Revenue increased from $6.04 billion a year go to $11.96 billion. This, however, failed to impress the markets and in the post-hours trading, the stock gained only 1%. By reading further you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.

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The German IFO Business Climate Index for July was confirmed at 100.8 (102.10 expected) but this didn’t stop the EURUSD (+0.28%) to close higher yesterday. The USD Index (-0.30%) traded lower with GBP (0.60%) leading the rally against the greenback with the CHF (+0.40%) in tow. JPY (+0.05%) had the most sluggish performance with hardly any gains at the close of the trading day. 

The US 10-yr Treasury yield (+0.007) ticked slightly higher finishing the day at 1.283%. This came after a five-month low of 1.1810% on Thursday last week. Gold (-0.14%) and Silver (+0.34%) traded gingerly with tight ranges and clearly expecting some directional guidance from the FOMC. Light Crude Oil futures (-0.22%) dipped intraday in mixed trading as the market participants tried to balance the supply and demand estimates. The demand should pick up sooner or later as the vaccination programs advance but at the same time the number of infections related to the Delta variant keeps on rising. 

The big US equity indices traded modestly higher yesterday. The S&P 500 (+0.24%) and the Dow Jones Industrial Average (+0.24%) moved hand in hand and both recording small gains while the Nasdaq Composite index (+0.03%) closed the day in green but almost unchanged. The best performing sectors were energy (+2.47%) and basic materials (+0.84%) while the healthcare sector (-0.65%) saw the biggest outflows. 

The biggest gainers among TIOmarkets equity CFDs were HAS (+12.24%), AAL (+4.15%), FCX (+4.15%), DVN (+4.02%) and SLB (+3.70%). NTES (-13.65%) and JD (-8.59%) continued their slides and topped the “loser-board” for the second day in a row. Other notable losers were LMT (-3.34%), MELI (-1.74%) and CTAS (-1.65%). Some of the big names reporting earnings (in the TIOmarkets equity CFD portfolio) today are UPS (-0.84%), GE (+1.65%), MSFT (-0.21%), V (+0.49%), MXIM (-0.06%), AMD (-0.36%), SBUX (+0.07%), GOOG (+1.33%) and AAPL (+0.29%). Look for increased volatility in these stocks today. 

Today’s main risk events are the speech by the RBA Deputy Gov Debelle and the release of the US CB Consumer Confidence. This week’s big risk events are the release of the FOMC statement and the FOMC press conference tomorrow. For more information and details see the TIOmarkets economic calendar here.

Tesla Inc. reported record earnings but the stock didn’t move more than 1% in the after-hours trading. This was due to the high earnings expectations. Analysts consensus had pegged the company to earn $0.96 per share and only a slightly higher number of $1.02 per share didn’t excite the market participants. Today’s trading in stock is likely to be quite revealing on how the street thinks about the stock now that it failed to create a significant earnings surprise. The 621 support has been holding lately but now we need to see a convincing break above 668 in order to believe the stock has reasonable chances of challenging the 699.92 resistance.

After rallying higher over 4% last week DAX index is showing signs of weakness. The rally started to falter near the upper end of a bear channel and now the index threatens to violate yesterday’s low.  It seems that traders are paring the risks in their portfolios before the FOMC. The next significant support area can be found at the 15046 – 15148 range (recent swing low and the 23% retracement level). To turn the technical picture bullish we’d need to see a decisive break above the 15691 resistance level and then continued buying that would challenge the 15812 resistance level. 

Macro Drivers for the USD 
As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.

The FEDThe Fed has now changed the tune and is moving away from the ultra-accommodative monetary policy. Currently, the expectation is that the first-rate hike would take place in the second quarter of 2022. 
StimulusThe US lawmakers have authorised approximately five trillion dollars of economic stimulus and the Biden administration is negotiating with the Senate Republicans to introduce a $1.2 trillion infrastructure stimulus plan. 
YieldsAfter trending higher since the beginning of August 2020, the Treasury yields have been moving lower since March 2021. All in all, the yields and interest rates are extremely low on both nominal and real basis. 
Employment Even though the June NFP report came in better than anticipated (+850K) the total is still 6.8 million jobs lower than at its peak in February last year. However, the Fed has said earlier recently that believes that the US is on a path to a very strong labour market as indicators of activity and employment continue to improve.
InflationThe year on year headline CPI change for June was 5.4% (4.9% expected. This suggests the Fed might have an incentive to move quicker in their tapering plans. 

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 Market News & Facts 

  • The FOMC expected to be neutral and to slow the USD strength
  • German IFO Business Climate Index for July 100.8 (102.10 expected)
  • Amazon not to accept bitcoin in 2021
  • Dallas Fed manufacturing index for July 27.3 (31.1 previous)
  • The US federal moratorium on rental evictions ends in August
  • BOE digital currency for the UK gets support from a study
  • Still substantial disagreement over the US infrastructure deal
  • Amazon preparing to accept payments in cryptocurrency?
  • Markit July US services flash PMI 59.8 (64.8 expected)
  • Canada June retail sales +4.4% (-3.2% previous)
  • French July flash services PMI 57.0 (58.7 expected)
  • German July flash manufacturing PMI 65.6 (64.2 expected)
  • UK July flash services PMI 57.8 (62.0 expected)
  • ECB’s Villeroy thinks it’s justified to keep the accommodative policy stance 
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The Next Main Risk Events

  • JPY – BOJ Gov Kuroda’s Speech
  • AUD – RBA Deputy Gov Debelle’s Speech
  • USD – CB Consumer Confidence
  • AUD – CPI and Trimmed Mean CPI q/q
  • CAD – CPI, Common CPI, Median CPI and Trimmed CPI y/y
  • USOIL – Crude Oil Inventories
  • USD – FOMC Statement and Federal Funds Rate
  • USD – FOMC Press Conference

For more information and details see the TIOmarkets economic calendar here.

Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets.com

Open a VIP Black account now at www.TIOmarkets.com. We want you to be able to exploit trading opportunities in financial markets with 0 commission and tight spreads. Take advantage of the best trading account in the industry: Tiomarkets VIP Black. For more details on this truly exceptional offering see here. For more analysis and commentary, visit our YouTube channel where you can find market commentary videos to support your learning and growth as a trader.

DISCLAIMER TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyzes and comments presented do not include any consideration of your personal investment objectives, financial circumstances or needs. The content has not been prepared in accordance with any legal requirements for financial analyzes and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval. FX and CFDs are leveraged products. They are not suitable for every investor, as they carry a high risk of losing your capital. Please ensure you fully understand the risks involved. All the prices in this report are CFD prices based on price charts provided by TIOmarkets unless otherwise stated. 

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