Early Morning Call: Germany PPI shows lowest increase in nearly two years

Indices overview

Equity markets are little changed around the globe.

Yesterday, the Dow Jones recorded the largest daily variation with a 0.23% fall.

The currency market is equally hesitant this Thursday, apart from the New Zealand dollar, which is down against all major currencies as consumer price index in the country rose 6.7% year-on-year (YoY) in the first three months of the year, slowing from the 7.2% increase in the fourth quarter (Q4).

In China, the People's Bank of China (PBoC) kept its key lending rates unchanged for an eighth straight month earlier this morning. The one-year loan prime rate (LPR) was left unchanged at 3.65%, while the five-year LPR, which is the reference for mortgages, was kept at 4.3%

In Japan, import growth continued to outpace exports in March, due on the import side to the cost of energy prices, and on the export side to a fall of shipments to China. Exports rose 4.3% in March from a year earlier, logging a 25th straight month of increase. This was more than economists' median estimate of a 2.6% gain, but below the 6.5% increase recorded in February. Exports to China, Japan's largest trading partner, fell 7.7%.

Australia's central bank is expected to get a new specialist board to manage monetary policy that will give independent expert members more responsibility for setting interest rates, a dilution of the bank's traditional power over policy. The review recommended the MPB meet eight times a year, instead of the current 11, more in line with international practice.

In Germany, producer price index (PPI) fell more than expected month-on-month (MoM), and was down 2.6% in March. Economists had anticipated a 0.5% fall. This mean that PPI rose by "only" 7.5% YoY, after a 15.8% rise the previous month, the smallest rise since May 2021.

Also expected today, initial jobless claims, Philly Fed manufacturing index and existing home sales in the US, and at 3pm, eurozone consumer confidence flash is forecast to rise to -18.5 in April, from -19.2 the previous month, which would be a 14-month high for the index.

Equities

Elsewhere on the equity market, Rio Tinto reported a better-than-expected 15.4% jump in iron ore shipments in the first quarter (Q1).

Rio Tinto shipped 82.5 million tonnes of iron ore from Pilbara operations in the period, to be compared with the 71.5 million tonnes of the first tree months of 2022, and beating analysts' 79.8 million tonnes forecast.

Rio reaffirmed its annual iron ore shipments forecast of between 320 and 335 MT and unit cost estimate of $21 to $22.5 per tonne of Pilbara iron ore.

Tesla shares fell by nearly 8% in extended trading after the electric car maker posted its lowest quarterly gross margin in two years. Top and bottom lines were marginally below expectations. Tesla posted earnings of 85 cents per share on revenue of $23.30 billion. The Street anticipated earnings per share (EPS) of 86 cents and revenue at $23.78bn.

Since January Tesla has cut its prices, first in China, then in Europe and the US, in an attempt to spur demand and fend off rising competition. But as expected this had an impact on gross margins, which fell to 19.3%, lower than the 21.2% expected by analysts.

In the conference call following the release, CEO Elon Musk said "It was better to shift a large number of cars at lower margin and harvest that margin in the future as we perfect autonomy."

Investors were also taken aback by Tesla's production forecast. Musk had said earlier this year two million vehicle deliveries were achievable, a number he didn't confirm yesterday evening. Instead, he stood by the company's official target of 1.8 million deliveries.

IBM posted mixed results yesterday evening. Earnings per share came in higher than expected at $1.36, 9 cents, while revenue fell marginally short of expectations, at $14.30bn. Shares initially rose at the release but quickly pared these gains to end the session 0.56% higher.

Set to report earnings today are AT&T, Philip Morris, and American Express.

Commodities

US crude oil inventories last week fell more than forecast. Crude oil stocks fell 4.6 million barrels. Analysts anticipated a 1.1 million barrel fall.

This was due to an increase of refining activity. Refinery utilisation rates rose by 1.7 percentage points to 91%, its highest rate since late December.

Meanwhile gasoline stockpiles unexpectedly rose on disappointing demand by 1.3 million barrels, while distillate stockpiles fell by 400,000 barrels.