over 2 years ago • 3 mins
Data out on Wednesday showed that Europeans are spending as much as they did before the pandemic – and in all their old favorite haunts too.
What does this mean?
Europe’s been enjoying a return to almost-normal: schools and offices have reopened after a year and a half, and nearly two-thirds of the region’s residents are now fully vaccinated. So it stands to reason that they’re flocking to shops and restaurants in their droves, with the use of public transport at its busiest since the start of you-know-what. Even movie theaters are making as much money as they did in the beforetimes – all the more remarkable considering the lockdown-driven shift toward streaming services. The million euro question, then, is how long Europe can keep this up: tourism still hasn’t fully recovered and supply shortages aren’t going anywhere, so the region’s not exactly out of the woods yet…
Why should I care?
The bigger picture: The US wants more debt.
The US isn’t in such a secure spot. See, the country has a habit of spending more money than it makes from taxes, and it issues bonds to make up some of the shortfall. But the government’s now reached the limit on what it can borrow, and it’s looking for the votes to raise that so-called “debt ceiling”. If it can’t find them by the end of the week, the government could run out of money as soon as mid-October, putting a stop to everything from welfare payments to infrastructure investments.
For markets: A bad month to be a bond.
A strapped-for-cash US won’t be able to pay interest on its bonds either, which would send prices plummeting. That’d only add to the market’s problems: the world’s central banks have already said they’re thinking about raising interest rates, which would make existing bonds less attractive and bring down their prices. That threat alone has sparked a selloff, which might explain why the bond market’s on track for its worst month since March.
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Micron warned investors on Tuesday that this quarter’s profit would be weaker than expected – even if the industry’s other players are following a different pattern.
What does this mean?
You’d think Micron would be having an easy enough ride: carmakers and industrial companies are in serious need of its semiconductors, and demand from data centers is on the rise too. But computer manufacturers – one of Micron’s biggest customers – have been struggling to get hold of the parts it needs to actually manufacture said computers, and have subsequently been cutting back on chip purchases. The company is confident orders will pick up again when those shortages clear up, but investors are going to have to grit their teeth in the meantime: Micron’s admitted that its profit for this quarter is set to disappoint.
Why should I care?
For markets: Investors aren’t impressed.
Micron’s stock is down for the year, which actually makes it a bit of an outlier in the industry: the value of an index tracking 30 of the biggest chipmaking firms has risen by nearly 19% over the same period. Throw this profit warning into the mix, and the company isn’t exactly winning any friends: investors sent its stock down 4% on the back of the announcement.
The bigger picture: ASML is looking to profit from the shortages.
ASML Holdings has no such complaints: the semiconductor equipment maker said on Wednesday that it’s expecting orders to keep flooding in over the next decade. And it might well be right, with Taiwanese chipmaking giant TSMC already having promised to spend $100 billion on ramping up production between now and 2024 alone. That’s a lot of cash up for grabs, and investors seem to agree that ASML will be the one to grabs it: they’ve sent the equipment maker’s shares up more than 55% this year.
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