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Rivian IPO, Supply Chain Torment, Musk Tweet on Hertz - What's Moving Markets

EconomyNov 02, 2021 18:56
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By Geoffrey Smith -- Rivian, a company without any meaningful sales to date, plans an IPO that would be the third largest in U.S. history after Alibaba (NYSE:BABA) and Facebook (NASDAQ:FB). The world’s supply chain agony is set to drag on for at least another five months. Stocks and oil are quiet as the Federal Reserve starts its two-day meeting, but the central bank of Australia shows that inflation hawks aren’t having things all their own way just yet. Tesla (NASDAQ:TSLA) stock falls in premarket after an eye-catching tweet by Elon Musk. Here’s what you need to know in financial markets on Tuesday, 2nd November.

1. Rivian eyes $8.4 billion IPO

Rivian, the electric van and truck maker backed by Amazon (NASDAQ:AMZN) and Ford, is looking to raise up to $8.4 billion in what would be one of the world’s biggest ever initial public offerings.

The company, which has yet to sell its products in any meaningful volume, is targeting a valuation of around $53 billion – more than Ferrari (NYSE:RACE) and only a little less than Honda. If achieved, that could unlock substantial value both for Amazon, which holds a stake of just under 20%, and Ford Motor (NYSE:F), which owns 5%.

Amazon has already ordered 100,000 of the company’s planned electric vans in an attempt to cut the carbon footprint of its delivery network. Rivian’s expects its other source of revenue to be high-end pickup trucks, a space where it will compete with Tesla, as and when the latter’s ‘cybertruck’ plans are realized.

2. Nintendo, Maersk flag supply chain woes to drag on

The global supply chain drama got a couple of fresh twists overnight. AP Moeller-Maersk, the Danish shipping company that accounts for one in five of the world’s containers, said it expects the extraordinarily tight conditions for shipping to continue at least through the end of the first quarter of 2022.

The company also increased its share buyback program by $5 billion and branched out further into air freight operations.

Elsewhere, the newspaper Nikkei reported that Nintendo’s production of its Switch (NYSE:SWCH) game console will likely fall to 24 million in the current fiscal year (which ends in March), down from 28.8 million last year, due to shortages of silicon chips. Nintendo would be the latest in a growing list of companies that also includes Apple (NASDAQ:AAPL) to admit that supply chain issues are making it impossible to keep up with rampant demand from customers worldwide.

3. Stocks set to open flat; Tesla corrects after rally

U.S. stocks are set to open in consolidation mode later, after closing at new all-time highs on Monday. The market is likely to settle down ahead of the Federal Reserve’s policy meeting, which starts later Tuesday and concludes on Wednesday.

By 6:30 AM ET (1030 GMT), Dow Jones futures were down 4 points, effectively flat, while S&P 500 futures were down by less than 0.1% and Nasdaq 100 futures were down by 0.2%.

Stocks likely to be in focus later include Tesla and Hertz Global, after the former’s CEO Elon Musk tweeted that the two companies still haven’t signed a contract for the $4.5 billion order that added nearly $300 billion of market value to the EV maker.

 Earnings are due early from – among others – Pfizer (NYSE:PFE), Dupont, Rockwell Automation (NYSE:ROK), Global Payments (NYSE:GPN) and Gartner (NYSE:IT), while T-Mobile, Amgen (NASDAQ:AMGN), Activision Blizzard (NASDAQ:ATVI), Match Group (NASDAQ:MTCH) and Mondelez (NASDAQ:MDLZ) all report after the close.

4. Australia shows inflation hawks aren’t in control - yet

Inflation hawks got a reality check overnight as the Reserve Bank of Australia, which was expected by many to raise its key interest rate to rein in inflation that’s running over 3%, refused to do so. It said the country’s labor market still wasn’t strong enough to require such a step.

The RBA did however end its policy of trying to control the country’s yield curve, a policy modelled on the Bank of Japan’s. It said it will no longer intervene in the bond market to keep the three-year bond market at 0.1%, having signalled as much last week when market speculation blew the three-year note up to just under 1%.

At least one part of the Australian economy is going through a sobering cool-off. Iron ore futures prices fell another 5% in China on Tuesday, and have now reversed all of their gains since March 2020. That’s due in large measure to collapsing demand from Chinese steel companies, whose biggest customer is the real estate sector. 

5. Oil steady ahead of Fed, OPEC+; API Eyed

Crude oil prices were also mixed overnight as the market heads into a period of wait-and-see ahead of the Fed meeting. Another meeting, of the Organization of Petroleum Exporting Countries and other big exporters led by Russia – the so-called OPEC+ group – is also casting its shadow. That meeting is due on Thursday.

By 6:30 AM ET, U.S. crude futures were down 0.1% at $83.94 a barrel, while Brent futures were effectively flat at $84.72 a barrel.

The American Petroleum Institute will release its weekly data on U.S. inventories at 4:30 PM ET as usual.

Rivian IPO, Supply Chain Torment, Musk Tweet on Hertz - What's Moving Markets

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