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MARKET REPORT: Tesla shares crash to lowest level in more than two years amid US Senate probe into China relations
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Shares of Tesla plunged to their lowest level in more than two years after the electric car maker became embroiled in a US Senate investigation into relations with China.
The stock fell 8.9 percent on Wall Street, pushing its loss from its peak in November last year to nearly 70 percent.
The selloff came after letters from the US Senate Finance Committee asking eight major automakers about their Chinese supply chains were made public.
Santa slump: Electric car Tesla company shares fell 8.9% on Wall Street and suffered losses of nearly 70% since peaking last November
Among those to be contacted, in addition to Tesla, were General Motors, Ford, Honda, Toyota, Volkswagen, Stellantis, and Mercedes-Benz.
In June, a US law banned the import of forced labor goods from Xinjiang, in a backlash against Beijing’s treatment of Uyghur Muslims, which Washington has labeled as genocide.
In the letter, committee chairman Ron Wyden said: “It is vital that automakers review their relationships with all suppliers associated with Xinjiang.
“Unless due diligence confirms that components are not linked to forced labor, automakers cannot and should not sell cars in the US that contain parts sourced or produced in Xinjiang.”
The news will be of particular concern to investors in Tesla and the future of its sales in China, the world’s largest auto market.
Tesla’s share price is depressed by Elon Musk’s struggle to gain traction on Twitter after buying the social media giant for £38bn in October.
Hundreds of billions of dollars have been wiped from the value of his 13.42 percent stake — and he’s no longer the richest man in the world.
Musk’s stake is now worth £44 billion. Those shares would have been worth £145 billion just over a year ago. Tesla’s sell-off came as global markets plunged into the red as hopes of a Christmas rally before Christmas faded.
Upbeat economic data in the US has set the tone for further aggressive rate hikes and key benchmarks around the world fell.
The FTSE 100 fell 0.37 percent, or 28.04 points, to 7469.28, while the FTSE 250 fell 0.54 percent, or 101.58 points, to 18,762.07.
The losses reverberated around the world with the Dax 1.3 percent lower in Frankfurt and the Cac 0.95 percent lower in Paris.
On Wall Street, the Dow Jones fell 1.05 percent, while the S&P 500 fell 1.45 percent and the tech-heavy Nasdaq fell 2.18 percent.
The selloff came as data showed the U.S. economy was healthier than previously thought, with output rising 3.2 percent year-on-year in the third quarter, higher than the previous estimate of 2.9 percent.
Meanwhile, fewer Americans applied for unemployment benefits than expected. While this optimistic news can be seen as a catalyst for markets to recover, it fueled fears that the US Federal Reserve will aggressively raise rates to address inflation, damaging investor confidence.
“The economy is not as close to death as the markets had thought,” said Christopher Rupkey, an economist at FWD Bonds in New York.
“The Fed may have to raise rates even further in 2023 because the economy is not slowing down, so upward price pressures could continue.”
Sam Stovall, strategist at CFRA Research, added: “The GDP data beat many expectations. There are concerns that the economy will not give up too soon and is in a battle that will likely force the Fed to keep interest rates high for longer.”
The upbeat US news contrasted with the UK, where third-quarter manufacturing fell a worse-than-feared 0.3 percent, pushing Britain to the brink of recession.