By Peter Nurse
Investing.com -- Tesla (NASDAQ:TSLA) loses a key executive just after ending production plans for its expensive sedan. Bitcoin heads lower as institutional investors leave, crude weakens and stocks are subdued as the G-7 corporate tax plan has opposition. Here's what's moving markets on Tuesday, June 8th.
1. Tesla takes a couple of hits
The hoopla surrounding Tesla seems to be dissipating, with the electric car maker suffering a couple of recent blows.
On Monday, the company announced that long-time executive Jerome Guillen has left the company. This followed the cancelation of the production of the most expensive variant of its flagship sedan, the Model S Plaid Plus.
Guillen was one of Tesla's top four leadership members and had previously been seen as key. But there have been delays in the delivery of the battery-powered Semi electric commercial truck, the area of the company he oversaw for the last three months, amid battery cell supply constraints.
In addition to these issues, competition is on the rise.
Globally, Tesla was the largest seller of electric cars in 2020, but it’s losing market share in the important European market to domestic manufacturers, particularly Germany’s Volkswagen (DE:VOWG_p). The U.S. company saw its electric vehicle market share fall by 10% in Europe last year despite the EV market rising 123 percent overall.
In China, Tesla’s second largest market, vehicle orders nearly halved in May from April, against the backdrop of increased government scrutiny.
Additionally, Reuters reported Tuesday that Apple (NASDAQ:AAPL) is in early-stage talks with a couple of Chinese companies about the supply of batteries for its planned electric vehicle.
Apple has yet to make a public announcement about its car plans, but Reuters has previously reported that the tech giant has been working on self-driving technology and has targeted 2024 for the production of a passenger vehicle.
Tesla stock edged higher premarket, but is down over 14% since the start of the year. Obviously that pales alongside the gains of over 800% over the last three years, but that does create plenty of downside!
2. Stocks subdued ahead of inflation release
U.S. stocks are set to open in a subdued fashion Tuesday, with investors cautious ahead of the release of key inflation data.
By 6:30 AM ET, Dow Jones futures were down 15 points, less than 0.1%, S&P 500 futures were 0.1% higher and Nasdaq 100 futures climbed 0.3%.
The major averages have traded in tight ranges this month, and on Monday the blue-chip Dow dropped 0.4%, the broad-based S&P 500 fell 0.1%, while the tech-heavy Nasdaq Composite outperformed, gaining 0.5%.
Investors are reluctant to take heavy positions ahead of the release of the latest inflation numbers on Thursday following last Friday’s jobs report. While the U.S. added fewer jobs than expected in May, the unemployment rate dropped to 5.8% from 6.1% and there were signs that wage growth also accelerated.
Economists are expecting the May CPI to rise 4.7% from a year earlier, according to Investing.com, a jump from April’s 4.2%, which was the fastest rise since 2008.
This number is one of the last major pieces of economic data ahead of the next Fed meeting on June 15-16, with a big jump potentially prompting central bank officials to prepare markets for a tapering of its asset purchases.
In corporate news, the so-called meme stocks are likely in focus again Tuesday after the likes of GameStop (NYSE:GME), AMC Entertainment (NYSE:AMC) and BlackBerry (NYSE:BB) registered double-digit percentage gains Monday.
The Securities and Exchange Commission announced Monday it’s observing markets and looking for any signs of misconduct and manipulation, saying “we will act to protect retail investors if violations of federal securities laws are found."
Biogen (NASDAQ:BIIB) could also be in the spotlight after the biotech’s stock gained almost 40% Monday on the back of the FDA approving its groundbreaking Alzheimer’s drug.
3. Institutional investors desert Bitcoin
One of the early criticisms of cryptocurrencies was the potential link to criminal activity. This narrative has largely been debunked, with a 2021 report by Chainalysis, a New York-based software company, stating that in 2020 the criminal share of all cryptocurrency activity was just 0.34% ($10.0 billion in transaction volume).
That said, the price of Bitcoin, the world's largest cryptocurrency by market capitalisation, slumped around 8% after U.S. officials announced Monday they had recovered almost all the Bitcoin ransom paid to the perpetrators of the cyber attack on Colonial Pipeline last month that resulted in a shutdown of the country’s largest gas pipeline.
The action signals U.S. law enforcement’s ability to track cryptocurrency and seize funds, a potentially powerful tool in combating ransomware attacks.
A more significant reason for the selloff is, in all likelihood, continued selling by institutional investors.
According to a report from CoinShares, released Monday, institutional investors are continuing to reduce their exposure to the digital currency, with BTC investment products seeing a record outflow of $141 million this past week.
The data follows heavy institutional selling amid May’s dramatic crypto market meltdown, with institutions having withdrawn nearly $100 million from crypto products between May 10 and May 16.
Bitcoin is down over 40% over the last month, but the cryptocurrency is still up year to date, and over 240% higher over the last year.
4. G-7 corporate tax backlash
It didn’t take long for the opposition to the G-7’s corporate tax plan to emerge.
The Group of Seven advanced nations agreed over the weekend on a minimum global corporate tax rate as part of a broader deal on how to tax multinational companies such as Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL).
This deal will now be put to the broader Group of 20 in coming months, with the ultimate agreement -- in negotiations under the leadership of the Organization for Economic Cooperation and Development -- needed from around 140 nations.
Getting all these nations to sign up will be tricky, particularly as some of them have deliberately used low corporate tax rates to lure foreign investment. However, the main opposition could come from within the G-7 itself.
Several top U.S. Senate Republicans on Monday rejected the deal, raising questions about the U.S. ability to implement a broader global agreement.
The G-7 finance ministers agreed to pursue a global minimum tax rate of at least 15%, but President Joe Biden has pitched to Congress a corporate tax rate of 21% rate for U.S. companies’ profits logged abroad.
Any discrepancy could mean American firms effectively paying a surtax on profits in some nations, in all likelihood a difficult sell to a deeply-divided Congress.
"There will be no Republican support for this, and they'll have to do this on a party-line vote. That needs to fail," said Republican Senator Pat Toomey on Fox Business Network Monday.
5. Crude down as rally falters
Crude oil prices weakened again Tuesday, as the rally that took prices to multi-year highs faltered amid concerns about the fragile state of the global economy recovery.
By 6:30 AM ET, U.S. crude was down 0.3% at $69.02 a barrel, after touching $70 for the first time since October 2018. Brent was down 0.3% at $71.26, after previously hitting $72.26, the highest since May 2019.
Friday saw a softer-than-expected U.S. nonfarm payrolls release, and on Monday China’s crude oil imports fell 14.6% year-on-year in May, giving bulls something to think about.
The market is also watching for any progress between Iran and world powers to revive a nuclear deal, with discussions entering a decisive phase, according to the agency monitoring Tehran’s atomic sites.
A successful conclusion could include Washington lifting economic sanctions on Iranian oil exports, potentially resulting in 500,000 to 1 million barrels of crude per day reentering the global market.
That said, crude’s advance from the lows seen at the start of the Covid-19 outbreak has stalled a handful of times this year, but prices have managed to return to an upward track as overall global demand keeps improving.
Later in the session, traders will be keeping an eye on the American Petroleum Institute’s weekly estimates of U.S. crude supplies.