Drama in the EV market

But weakness hasn't spilled over elsewhere

Chart of the Day

One of the intriguing things about this year has been the bubble-like behavior in many areas of the market. That has been on fine display across electric vehicle maker share prices, many of which remain very high even after plunging in the past week. For example, despite dropping by a further 19% yesterday, Workhorse is still up by over 500% so far this year. Nio is still up by over 1100%. Even Nikola, which has dropped back by 77% since June, remains up by 78% in year-to-date terms. Of course, the one to watch is Tesla. If weakness spills over to that company, it could be more broadly felt across the overall equity market.

Macro

The US ADP employment report is the precursor to the non-farm payrolls release out this Friday, and showed that 370,000 jobs were added in November. That doesn’t seem to bode well for the NFP report, for which the consensus expectation is a 490,000 rise, although the ADP has been giving a weaker picture of the labor market recovery so far.

US mortgage applications surged by 9% last week to a new high for this cycle, although they appear to have been boosted by more people applying during the Thanksgiving holiday, so will probably drop back again this week.

The October German retail sales data showed another unusual development of this year. Restrictions on services have caused spending on goods, and therefore retail sales, to surge, despite very low levels of consumer confidence.

Markets

The weekly EIA energy report confirmed that gasoline demand fell further below seasonal norms last week, as fewer people traveled for the holidays than usual.

While crude inventories nevertheless declined modestly, they would normally start falling more sharply around this time of year as holiday travel picks up.

The UK’s FTSE 100 was one of the few markets to register a notable gain yesterday, as the country became the first to approve the Pfizer/BioNTech vaccine for distribution.

Any optimism there was not on display in the FX market, however, with GBP dropping back from its recent high against the USD and falling further against the EUR.

10-year bond yields generally rose in most countries yesterday. It’s interesting that many appear to be converging near 1%, which could be a sign of the more active role central bankers are playing this year in keeping yields under control. Of course, in Australia, the central bank is explicitly targeting a three-year bond yield of 0.25%.

The MOVE index of implied option-market volatility shows investors are wary of further rises, at least in the US. The MOVE rose to 43.9 yesterday, although is still much lower than ahead of the US election at the start of November.

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