By Geoffrey Smith
Investing.com — China’s economy grew at its fastest rate in eight months in February, picking up momentum after the end of COVID-19 lockdowns, according to new business surveys. Tesla is expected to confirm plans for a $5 billion plant in Mexico. Arconic is rising on reports of talks with private equity giant Apollo and perhaps others over a potential takeover. Sterling weakens and euro rises on conflicting news from top central bankers, and oil hits weekly high on fresh signs of weakening US demand. Here’s what you need to know about the financial markets on Wednesday March 1st.
1. Chinese assets and metals rise as China PMIs show reopening jump; ISM PMI due
The yuan gained 1% after key business surveys showed the Chinese economy grew at the fastest pace in eight months in February.
Both the official and Caixin Manufacturing PMIs have risen sharply since January, well above the 50 level that normally indicates growth. The official manufacturing PMI, which largely tracks the larger state-owned companies, hit its highest level in more than a decade.
The news gave a boost to base metal prices, which rose 1-2%.
The numbers came on the same day that the US Institute for Supply Management releases its manufacturing PMI for February, which is expected to show a decline in US activity, albeit less than in January.
2. Tesla wants to outline plans for the first Mexican plant
Tesla (NASDAQ:TSLA) will unveil plans for its first factory in Mexico during a major Investor Day presentation.
Mexico’s left-wing President Andrés Manuel López Obrador said at a news conference on Tuesday that the two sides had settled differences over the company’s plans for a plant in Monterrey, in northern Mexico, that will focus on Tesla’s intensive use of water in a region in which doesn’t do a lot of the stuff.
Analysts expect an investment volume of around USD 5 billion. The burden on Tesla is being reduced (again) by subsidies from the US federal government, this time under the Inflation Reduction Act, whose provisions extend to the US’s southern neighbor.
Elsewhere in the auto industry, shares of Rivian (NASDAQ:RIVN) fell over 9% premarket after the electric vehicle maker reported another big loss and missed expectations for its fourth-quarter sales. General Motors (NYSE:GM), meanwhile, is set to cut another 500 senior positions as part of its ongoing cost-cutting program.
3. Stocks to open higher; Arcane fluctuations in buyout talks
US stock markets are likely to open slightly higher after falling on Tuesday in response to another set of generally weak US economic data.
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As of 06:30 ET, Dow Jones futures are up 68 points, or 0.2%, while S&P 500 futures are up 0.3% and Nasdaq 100 futures are up 0.6%.
Aside from Tesla, there are stocks that will likely be in focus later monster drink (NASDAQ:MNST), whose earnings came in below expectations late Tuesday, and Arconic (NYSE:ARNC), which rose sharply on Tuesday after the Wall Street Journal reported that it was in talks to sell Apollo Global Management (NYSE: APO) leads. . The news adds to signs of a thawing in the M&A market, which froze late last year as banks struggled to sell large volumes of unsold buyout debt.
4. Pound falls, Euro firm as Bailey and Nagel send mixed messages on more rate hikes
The pound fell after Bank of England Governor Andrew Bailey appeared to downplay expectations of more aggressive rate hikes later this year. As with the euro and dollar, some better-than-expected economic data earlier in the year – including strong January consumer credit data released earlier on Wednesday – has prompted a reassessment of interest rate expectations for the pound.
However, Bailey said in a speech that “nothing is decided,” despite acknowledging ongoing labor market tightness problems – and despite figures released on Tuesday showing food prices rising more than 17% in January from a year earlier are.
In Germany, Bundesbank chief Joachim Nagel was decidedly less nuanced, saying it would be a grave mistake to halt the European Central Bank’s rate-hiking cycle too soon. Preliminary data showed that German inflation again beat expectations in February, while unemployment rose less than forecast.
5. Oil falls on another big rise in US inventories
Crude oil prices were broadly lower with another sharp rise in US inventories outweighing the supportive impact of Chinese PMI data.
Data from the American Petroleum Institute late Tuesday showed another 6.2 million increase in US crude inventories over the past week, well above expectations and skewing the market toward an upside surprise when the government releases data at 10:30 ET published.
Analysts noted that China’s reopening story, by contrast, was largely priced in.
As of 06:45 ET, US crude futures are down 0.9% to $76.33 a barrel, while Brent crude is down 0.6% to $82.91 a barrel.
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