Markets stable as NFPs loom

Global markets were largely unchanged on Thursday as investors await the release of perhaps the single-most anticipated economic data release, US non-farm payrolls (NFPs). The number, and the extent to which it differs from market expectations will often cause volatility in the markets in the minutes around the release, but more importantly it may give clues about future monetary policy movements in the US. Given the global reach and implications of rate hikes – or the lack of them – it is no surprise that markets heighten their attention in the days leading to the release of US NFPs.

A whipsaw in oil prices and the US dollar characterized the trading day in developed markets. Oil topped $45 at one point on supply disruptions in Canada but the US dollar recovered some ground after hitting multi-month lows earlier this week. The strong dollar ultimately pushed oil lower. In emerging markets risk took a further hit as political turmoil in Turkey escalated. The current prime minister stepped down claiming political interference, and crucial talks about migrant passage and EU accession could be back on the table for Turkey. A gauge of emerging market shares fell to a 7-week low, and yields on 10-year Turkish government bonds rose above 9.5%.

In company-specific news, newly-merged Kraft-Heinz reported first-quarter earnings which beat the Street’s expectations on revenue and earnings per share. Kraft and Heinz had merged in July 2015, and have planned to reduce annual spending by $1.5 billion by the end of next year. Shares rallied more than 10% from Wednesday after-hours trading, and settle at around $84.

Alibaba, China's largest e-commerce company, said fourth-quarter sales rose a whopping 39% after its core online shopping business grew, but profit fell for the first time as it spent on ventures like food delivery, logistics and e-commerce. The results are a comforting sign that the Chinese consumer may not be weakening just yet, but Alibaba is already seeking new grazing fields. In the first 3 months of this year it has spent $2.2 billion on non-e-commerce ventures, and has also said it would acquire Southeast Asia online retailer Lazada Group for roughly $1 billion. Shares in Alibaba were in the green for the day.

Headwinds for Alibaba may also come from Chinese authorities, which announced a campaign on Thursday aimed to ‘clean up e-commerce’. The campaign targets trademark violations, counterfeit and sub-standard quality products and illicit boosting of merchant rankings – all of which Alibaba is very familiar with.

Amazon could double its recently acquired fleet of Boeing 767 freighters to 40 as it seeks to take as much as a 30% stake in Atlas Air Worldwide Holdings. The deal would see the carrier buy and operate 20 planes for Amazon, as the e-commerce and retail giant seeks to build up its delivery network and reduce its dependence on UPS and FedEx. Upon the news, shares in Atlas soared as much as 51% (!), its largest ever intraday rise since its July 2004 listing, before settling 27% higher, at around $49.

But perhaps the greatest announcement so far came from Tesla, and we’re not talking about Model 3 pre-orders. CEO Elon Musk has up-scaled what were already consider ambitious production plans to revolutionary. The company now plans to produce 500,000 electric vehicles starting in 2018, and sales close to 1 million by 2020.

Many analysts have deemed the planned expansion as unattainable – indeed Tesla fell 5% in the wake of the announcement, but in their CEO’s words Tesla is “hell-bent on becoming the best manufacturer on Earth. The whole team is super-focused”.

Autonomous Autos

Autonomous or self-driving cars seem to be the next big thing judging by recent developments. Alphabet, Google’s parent company, finally struck a deal with Fiat Chrysler to trial its systems in a new minivan. The tech giant had been testing for months but had acknowledged it need a partner with expertise in the auto sector.

Not to be undone, Ford announced a $182 million investment in Pivotal Software Inc, a company which, amongst others, already supplies Lockheed Martin with proprietary computer applications. Earlier this year, General Motors poured $500 million into Lyft, a ride-hailing company. Both companies said they had made significant progress toward developing a self-driving cab to be used at GM’s Michigan campus by the end of the year.

This article was issued by Andrew Martinelli, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd. has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.