Europe Shines while America Shies | Calamatta Cuschieri

Mixed markets, Tesla’s heated earnings call & VW’s ongoing restructuring

U.S. stocks retreated from the modest gains they saw to close lower Wednesday, as the Federal Reserve acknowledged rising prices and said it now expects inflation to “run near” its 2% target “over the medium term,” in its most recent policy statement.

The central bank held key rates unchanged, as expected. The Dow Jones Industrial Average closed 174.07 points, or 0.7%, lower at 23,924.98, with 24 of its 30 components finishing in negative territory. The S&P 500 index 19.13 points, or 0.7%, to 2,635.67, with 10 of the 11 main sectors closing with losses.

European stocks rose, helped by upbeat corporate updates, as many markets in the region reopened after closing for May Day. The U.K.’s FTSE 100 rose 0.4% to 7,572.98, while Germany’s DAX 30 added 1.7% to reach 12,824.3. France’s CAC 40 added 0.2% to 5,530.80 with the overall Stoxx Europe 600 index was up 0.6% to 387.28, trimming its year-to-date decline to 0.5%. Tech stocks were among the top performers. Shares of chipmakers Austria Microsystems and STMicroelectronics rallied after Apple reported strong second-quarter earnings.

Tesla Inc unusual earnings call

Investor relations of US electric-car maker, Tesla Inc., took a troubling turn after Elon Musk, chief executive officer, cut off analysts and got defensive about probing questions pertaining to the company’s finances during a highly unusual earnings call. Questions over Tesla’s finances are top of mind, and many analysts anticipate a capital raise in 2018 despite Musk’s statements that it will not be necessary due to profitability and positive cash flow in the third or fourth quarters.

Tesla stock was little changed after the earnings announcement, but fell during a conference call, when Musk began cutting analysts’ questions short, costing Tesla over $2 billion in market capitalization. “These questions are so dry. They’re killing me,” Musk said after an analyst asked what percentage of Tesla 3 reservation holders have started to configure options for their cars, an indicator of how much profit Tesla will be able to wring from the vehicles. Another analyst asked about a capital requirement before being cut off. “Excuse me. Next. Next,” Musk said to the call operator. “Boring, bonehead questions are not cool. Next?”

Further shuffling at VW

Volkswagen is pondering spin-offs of non-core assets such as motorcycle maker Ducati and transmissions maker Renk, its new chief executive, Herbert Diess, said, as the group seeks to boost its efficiency and become more nimble. The deliberations could lead to steps to expand those businesses and to develop growth strategies, but spin-offs “are also conceivable”, Diess said, without being more specific.

Executives at Europe’s largest automotive group and its Czech subsidiary have also been looking at ways to boost output at Skoda, including building a new factory outside the brand’s Czech home, to help it keep up with booming demand. The VW factory in Osnabrueck, which also builds the Porsche Cayenne SUV, will paint and assemble the Skoda Karoq, but the move will only be temporary with the bulk of Karoq production set to remain in the Czech Republic, Skoda said.

Disclaimer:

This article was issued by Peter Petrov, Junior 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.

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