By Geoffrey Smith
Investing.com -- OPEC forces oil prices sharply higher with a surprise cut in output quotas. Tesla posts record deliveries but is behind Elon Musk's target for growth this year. And UFC owner Endeavor is reportedly in talks to merge with WWE. Here's what's moving markets on Monday, April 3rd.
1. Saudi Arabia leads shock cut in OPEC oil output
The Organization of Petroleum Exporting Countries is to cut its oil production target by 1 million barrels a day from May, aiming to put a floor under crude prices that have fallen in recent weeks in response to an economic slowdown across developed economies.
Bond yields moved higher as markets priced in a fresh boost to inflation over the course of this year.
The decision reflects the difficulty of reconciling the Saudi Arabian and U.S. views of the global energy market. It comes only weeks after the U.S. abandoned plans to refill the Strategic Petroleum Reserve this year, a measure that would have supported prices in the near term.
It also comes hard on the heels of a decision by the Biden administration to allow the Willow oil project in Alaska to proceed, a signal of more sensitivity to the U.S.’s own energy security needs.
As always with OPEC quotas, the actual change in current supply may not match the announced change. Analysts expect the actual reduction to be nearer 700,000 b/d.
U.S. crude futures, which had spiked as much as 8% on the news on Sunday, trimmed their gains as markets digested the bearish message underlying the step. By 06:00 ET (10:00 GMT), they were back below $80 at $79.60 a barrel, up 5.2% from Friday. Brent was up 5.1% at $83.94 a barrel.
2. Tesla 1Q deliveries leave it on track to miss Musk's target
Tesla (NASDAQ:TSLA) hit a new record for car deliveries in the first quarter, juiced by aggressive price cuts in January.
The company delivered over 422,000 cars in the three months through March, up 36% from a year earlier and up 4% from the December quarter. That falls clearly short of Elon Musk’s implicit target of over 50% growth, although growth is expected to pick up in the second half of the year as output ramps up at the company's newer factories.
The numbers come against the backdrop of spreading layoffs in higher-paying parts of the U.S. economy, which provides the greater part of Tesla’s customer base.
Tesla stock fell some 2% in premarket trading in response.
3. Stocks set to open mixed; ISM Manufacturing PMI due
U.S. stock markets are set to open the week mixed on the back of the surprise OPEC move, which has cast further doubt over the ability of the Federal Reserve to start easing monetary policy in response to the economic slowdown.
By 05:30 ET, Dow Jones futures were up 102 points, or 0.3%, but S&P 500 futures were down 0.2%, and interest rate-sensitive Nasdaq 100 futures were down 0.7%.
Stocks likely to be in focus later include Endeavor Group after reports that it’s eyeing a merger with wrestling franchise owner WWE (NYSE:WWE), and McDonald’s (NYSE:MCD), which is reportedly set to announce layoffs across its group this week.
The data calendar is quiet with only the ISM manufacturing PMI due. Comparable surveys overnight disappointed in China but turned out slightly stronger than expected in the euro zone.
4. UBS set to cut 36,000 jobs after CS merger; Swiss prosecutors get busy
The fallout from UBS’s shotgun marriage with Credit Suisse (SIX:CSGN) continues. A Swiss newspaper reported on Sunday that UBS (SIX:UBSG) intends to cut up to 36,000 jobs as it right-sizes after being forced by regulators to swallow its cross-town rival in March.
The job cuts are most likely to be concentrated in the investment bank unit, which Credit Suisse was in any case in the process of shrinking. UBS had shrunk its investment banking and capital markets businesses after its flirtation with a collapse in 2008/9.
Over the weekend, Switzerland's Federal Prosecutor said it will investigate if the takeover of CS – which required a hasty rewriting of Swiss law - had entailed any possible criminal offenses. The announcement makes for a piquant prologue to Credit Suisse’s annual shareholder meeting, which is due to take place on Tuesday.
5. Ukraine war hurts European governing parties; bomb blast claims Russian propagandist
The pressure of the year-long war in Ukraine took a toll on ruling parties in Europe in two elections over the weekend.
Finland’s left-leaning Prime Minister Sanna Marin, lost power after a surge in support for parties on the center-right and right-wing, while a pro-Russian party made large gains in elections in Bulgaria, making the formation of a new government more complicated.
In Russia itself, authorities arrested Darya Trepova, an antiwar activist, in connection with a bomb blast that killed Vladlen Tatarsky, a prominent Russian military blogger, on Sunday. Ukraine's government said the incident was driven by internal tensions within Russia.
Tatarsky had achieved notoriety as a war propagandist, famously boasting in one video after the annexation of four Ukrainian provinces last year that: “We’ll defeat everyone, we’ll kill everyone, and we’ll rob everyone we need to. Everything will be just as we like it.”