On Wednesday, ASML, a manufacturer of chipmaking machinery, released its excellent quarterly earnings.
What does this mean?
Investing 101 teaches you that when an industry is experiencing a slump, its suppliers are likely to experience a difficult time as well. So it makes sense that the manufacturers of chipmaking equipment would be chewing their nails as well, given how the world of smartphones and PCs currently looks a little limp. Nuh-uh: not ASML, at least. In fact, the business said that its clients were still concentrating on constructing new manufacturing facilities, perhaps as a result of assistance from western governments. That resulted in record reservations for ASML as well as surprisingly strong revenue and profit numbers. Thrilled investors sent ASML's shares up 7% after the news, and with an encouraging prognosis for the current quarter as well.
Source: Google Finance
Why should I care?
The bigger picture: Going like hotcakes.
The success of ASML's business has made it impossible for it to meet demand. The company's backlog of orders is close to $40 billion, which is almost equal to the size of some small European countries' entire economy. In order to deliver items more quickly, ASML has been skipping certain final product testing and performing it later on the customer's facilities. Mind you, that is not a long-term solution, which is why the company intends to increase its production capacity over the following several years.
Zooming out: Embargo bugaboo.
Uncle Sam may be poised to spoil ASML's party just when things were getting off to a great start. New limitations on the sale of chip manufacturing equipment to China were announced by the US earlier this month. Although ASML is a Dutch company, the US embargo may prevent Chinese chipmakers from obtaining essential American equipment, which would reduce demand for ASML's products. The company doesn't appear concerned right now, but given that 15% of its income came from China last year, this could become a problem in the future.
Keep reading for our next story...
Prices Fly Higher In The Great British Take-Off
Data released on Wednesday revealed that UK inflation again reached double digits in the previous month.
What does this mean?
Hard-pressed When prices started to calm down in August after years of rapid inflation, Brits may have thought their luck was about to change. However, new data released on Wednesday indicates that inflation is not slowing down. Food costs increased by 15% from the previous year, which is the highest increase in decades, while the cost of furniture and other household products increased by 11%. These price hikes were significant enough to entirely overshadow some much-needed drops in gas and used car costs, which meant that overall consumer prices increased by 10.1% from the same point in the previous year in September, matching this year's July's record high.
Why should I care?
For markets: The Bank of England’s back for more.
The Bank of England (BoE) will be able to concentrate its efforts on combating inflation now that the government has reversed its decision to enact the chaos-creating tax cuts. In fact, some economists believe a 0.75 percentage point increase in interest rates is likely to occur next month, especially in light of the September inflation statistics. On top of that, the BoE announced this week that it will start selling some of the almost $1 trillion worth of government bonds it has accumulated over the years while supporting the economy. The sales will begin in November. That should decrease bond prices, raise bond yields, and raise borrowing costs all around.
Zooming out: Nice one, Nestlé.
Some of those rising food prices can be attributed to Nestlé. The largest food producer in the world reported that it increased prices by a significant 9.5% over the same period in 2021 in an effort to prevent rising transportation and ingredient costs from eroding its profit margin. However, consumers' wallets can only support so much, and Nestlé reported that as a result, it sold a reduced volume of goods.
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