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Tesla-Glencore Talks, Russia Grain Deal, Lula Victory - What's Moving Markets

Published 10/31/2022, 06:08 AM
Updated 10/31/2022, 06:52 AM
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By Geoffrey Smith

Investing.com -- Tesla eyes radical steps to lock in supplies of key battery metals, while Apple's main supplier is scrambling to relocate staff away from its biggest iPhone assembly plant in China due to a COVID-19 outbreak. The euro falls as Eurozone inflation surges past expectations yet again, while GDP growth fell short in the third quarter. Stocks are set to open with a mild consolidation after Friday's rally. Grain prices rise as Russia pulls out of a UN-sponsored deal to guarantee the safety of Ukrainian exports, and the Brazilian real strengthens as Luiz Inácio Lula da Silva defeats Jair Bolsonaro in a close-fought run-off for the presidency. Here's what you need to know in financial markets on Monday, 31st October

1. Tesla's radical metals plan and FoxConn's radical relocations

Tesla (NASDAQ:TSLA) held talks to take a stake in Glencore (LON:GLEN), one of the world’s largest mining groups, in an effort to lock in supplies of key battery metals, according to the Financial Times.

The talks, which took place earlier in the year, ended without any concrete results. Despite its recent selloff, Tesla still trades at a value of over 10 times Glencore’s, a skew that arguably flatters the EV maker’s market power over a key supplier that can just as easily sell to Tesla’s Chinese and European challengers.

Another mega-cap making headlines early on Monday was Apple (NASDAQ:AAPL), after its key supplier Foxconn (TW:2354) was forced to relocate staff away from its biggest iPhone assembly plant in Zhengzhou due to a worsening COVID-19 outbreak. Foxconn stock fell 0.7% in Taiwan, while Apple was down 0.6% in premarket on concerns that the outbreak may affect iPhone shipments during the key holiday period.

2. Eurozone CPI blows past expectations, dashing ECB pivot hopes

Eurozone inflation surged again to a new record high, casting doubt on the European Central Bank’s ability to ease off with its interest rate hikes.

Eurostat said prices rose 1.5% in October alone, pushing the annual rate of inflation up to 10.7%, well ahead of the 10.2% forecast. Even stripping out more volatile elements such as food and energy, core price inflation accelerated to 5.0% on the year, more than twice the ECB’s target.

At the same time, Eurostat said Eurozone GDP likely rose by only 0.2% in the third quarter, a sharp slowdown from 0.8% in the second quarter. That was despite a better-than-expected 0.5% gain in Italy. The euro fell 0.3% to $0.9937.

3. Stocks set to consolidate at opening; Dallas Fed survey, Berkshire earnings eyed

U.S. stock markets are set to open a touch lower, consolidating after a blistering rally on Friday on hopes of an early end to Federal Reserve interest rate hikes.

By 06:30 ET (10:30 GMT), Dow Jones futures were down 156 points, or 0.5%, while S&P 500 futures were down 0.6%, and Nasdaq 100 futures were down 0.7%. The Dow had finished at its highest in over two months on Friday, fuelled by massive profits at Big Oil.

The Dallas Fed business survey, due later, may have more to say about the oil sector’s resurgence.

Stryker (NYSE:SYK) and Mondelez (NASDAQ:MDLZ) report earnings later, along with Vornado (NYSE:VNO) and Avis (NASDAQ:CAR).

4. Grain prices rise as Russia pulls out of UN deal

World grain prices rose after Russia pulled out of a UN-sponsored deal that allows safe passage of exports from Ukraine’s ports. The agreement had been instrumental in bringing down grain prices by nearly 30% since May, when expectations of a deal had first risen.

U.S. wheat futures rose as much as 9% before paring gains, while corn futures rose as much as 3%, on fears that Ukraine will once again be unable to ship its surpluses to world markets.

Russia’s actions came in response to a Ukrainian military strike against the Russian Black Sea Fleet’s base in Sevastopol, Crimea. Ukrainian sources claimed that the strike, using seaborne drones, had severely damaged the BSF’s new flagship, Admiral Makarov. Moscow denied the claims.

5. Real edges higher as Lula completes remarkable comeback

Brazil’s Luiz Inácio Lula da Silva completed a remarkable political comeback, regaining the presidency after beating incumbent Jair Bolsonaro in a close head-to-head contest on Sunday.

Lula, who had been jailed for corruption after leaving office in 2010, received 50.9% of the vote, with Bolsonaro getting 49.1%. Bolsonaro did not, initially, acknowledge defeat, leaving some room for doubt as to whether he would leave office.

Lula promised in his speech to unite a deeply divided country, which has suffered from the corruption of both the main political blocs since the start of the commodities supercycle at the turn of the millennium.

The Brazilian real strengthened a little in response to the news, which promises a rapprochement with Brazil’s trading partners in the U.S. and Europe.

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