Tesla disappoints; Earnings parade; ECB takes center stage

Posted at 5:07 AM, Jul 25, 2019
and last updated 2019-07-25 08:22:20-04

1. Tesla bleeds: Even after delivering a record number of cars in its second quarter, Tesla is still bleeding money.

The electric carmaker said Wednesday that it lost $408 million during the three months ending in June, far worse than Wall Street had expected. Shares fell more than 10% in premarket trading.

The loss was slightly less painful than the previous quarter, when Tesla lost $702 million.

CEO Elon Musk also announced a key departure. J.B. Straubel, a founding member of the company, is stepping down from his role as chief technology officer and will become a senior adviser.

“I think everyone was a bit surprised, we thought this could be a moment where Tesla makes some more positive news,” Jessica Caldwell, executive director of insights at Edmunds, told CNN Business.

2. Earnings parade: It’s a big day for corporate earnings in Europe, where Nokia, Anheuser-Busch InBev, Volkswagen and Unilever have reported.

Nokia shares shot up 8% after the Finnish telecom equipment maker said that sales increased 7% in the second quarter.

It also said that “some customers are reassessing their vendors in light of security concerns,” suggesting that it may be picking up 5G orders because of concerns about Chinese rival Huawei.

Anheuser-Busch InBev reported increased revenue and drinks volume. Budweiser, Stella Artois and Corona sales increased 8.5% globally. Shares in the world’s biggest brewer gained over 4.5%.

Volkswagen stock got a mild boost after the company confirmed its guidance for 2019. Revenue was up nearly 5% in the first half of 2019, despite a small drop in vehicle sales. Operating profit was up 1.9%.

Unilever results were gloomier. Sales growth missed analyst expectations, and the owner of Ben & Jerry’s said bad weather in Europe and North America had harmed ice cream sales.

3. Nissan job cuts: Nissan warned last quarter that it was at “rock bottom.” Now it’s even more clear that its problems aren’t going away anytime soon.

Japan’s second biggest automaker said profits were almost completely wiped out in the first quarter of its fiscal year. Operating profit plunged 99% in the quarter compared to a year earlier. Revenue, meanwhile, dropped nearly 13%.

Nissan said it will slash roughly 12,500 jobs from its workforce worldwide. That’s more than twice as many positions as the company was reportedly expecting to cut in May. It’s also planning to reduce its product lineup and global production capacity by 10%.

4. Stimulus restart: Investors think the European Central Bank is preparing new stimulus to help bolster the region’s flagging economy. The question is when and how it will turn on the taps.

The central bank could provide answers on Thursday, when it reports its latest interest rate decision and outgoing president Mario Draghi gives a press conference.

Many investors expect the ECB to lay the groundwork for a September cut that would push its key lending rate further into negative territory. The central bank could also revive its bond-buying program.

The ECB has less room to maneuver than the US Federal Reserve, which is also expected to cut rates soon. With interest rates in Europe at record lows, economists say that governments must act to increase spending.

“The days of ‘whatever it takes’ are long gone,” said Societe Generale strategist Kit Juckes. “Fiscal policy needs to engage.”

5. Markets mixed: Stocks moved higher in Asia on Thursday. The Shanghai Composite rose 0.5%. Hong Kong’s Hang Seng and Japan’s Nikkei increased 0.2%. Seoul’s Kospi bucked the trend, closing down 0.4% after North Korea fired two short-range missiles.

In Europe, Britain’s FTSE 100 advanced 0.3% and France’s CAC 40 gained 0.6%.

US stock futures point to a mixed open. The Dow is set to open up 40 points, or 0.2%. The S&P 500 is little changed, while the Nasdaq is tracking down 0.3%. Amazon will report after the closing bell in New York.

6. Coming this week:

Thursday — ECB rate decision; US durable goods; 3M, American Airlines, Anheuser-Busch InBev, Comcast, Hershey, Nokia, Amazon, Alphabet, Intel, Mattel, Starbucks earnings
Friday — US Q2 GDP; McDonald’s and Twitter earnings