Daily Brief: ASML's Stellar Results Gave Investors The Tingles

Daily Brief: ASML's Stellar Results Gave Investors The Tingles

over 1 year ago3 mins

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Chipmaking equipment maker ASML reported lush quarterly results on Wednesday.

What does this mean?

Investing 101 tells you that when an industry’s facing a downturn, its suppliers are probably poised for a rough patch too. So with the world of smartphones and PCs looking a little limp right now, you’d guess that the makers of chipmaking equipment would be biting their nails too. Nuh-uh: at least, not ASML. In fact, the company said its customers continued to focus on building new manufacturing plants – likely thanks in part to support from western governments. For ASML, that meant record bookings and unexpectedly high profit and revenue figures. And with an impressive outlook on the cards for the current quarter as well, jubilant investors sent ASML’s shares up 7% after the news.

ASML stock
Source: Google Finance

Why should I care?

The bigger picture: Going like hotcakes.

ASML’s business has been so good that the company just can’t keep up with demand. The firm has a backlog of orders totaling nearly $40 billion – around the size of entire economies of some small European nations. So ASML’s been skipping some final product testing and carrying it out later on customers’ premises, in a bid to deliver products faster. That’s not a long-term solution, mind you, which is why the firm’s planning to boost its production capacity over the next few years.

Zooming out: Embargo bugaboo.

Just when everything was going so well for ASML, it looks like Uncle Sam could be about to rain on its parade. Earlier this month, the US issued new restrictions on selling chipmaking equipment to China. And although ASML is a Dutch firm, the US embargo could stop Chinese chipmakers getting their hands on vital American gear, denting demand for ASML's products by extension. The firm doesn’t seem worried for now, but with 15% of its revenue coming from China last year, this could be a thorn in its side going forward.

ASML results

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Prices Fly Higher In The Great British Take-Off

UK inflation image

Data out on Wednesday showed that the UK’s inflation broke double digits again last month.

What does this mean?

Hard-pressed Brits might’ve hoped their luck was about to change when rapidly rising prices started slowing down back in August. But new data out on Wednesday signals inflation shows no sign of letting up: food prices rose by 15% from last year, their biggest uptick for decades, while furniture and other household goods prices were up 11%. Those increases were big enough to completely dwarf some well-needed let ups in prices for petrol and second-hand cars, and meant consumer prices overall still rose 10.1% in September from the same time last year, matching this July’s 40-year high.

UK inflation

Why should I care?

For markets: The Bank of England’s back for more.

Now that the government’s done a U-turn on its chaos-inducing tax cuts, the Bank of England (BoE) will be able to focus its energy on tackling inflation. That’ll probably involve bringing out the big guns, especially in light of September’s inflation data: in fact, some economists think a 0.75 percentage-point interest rate hike is on the cards next month. That’s on top of the BoE’s announcement this week that in November it will start selling some of the nearly $1 trillion worth of government bonds it amassed while supporting the economy over the years. That should drive bond prices down, push up their yields, and further increase the overall cost of borrowing.

Zooming out: Nice one, Nestlé.

You can thank Nestlé for some of those rising food prices. The world’s biggest food maker said that it upped its prices by a hefty 9.5% last quarter versus the same time in 2021, in a bid to limit increasingly pricey ingredients and transport costs eating into its profit. But consumers’ wallets will only take so much, with Nestlé revealing it sold a lower volume of goods as a result.

Nestle prices


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