A look at the day ahead in the US and global markets by Mike Dolan
Tech-hit stock markets will breathe a sigh of relief on Thursday as the world’s largest chipmaker hits the streets and clears nagging doubts about global semiconductor demand and jitters about the broader topic of artificial intelligence.
After Europe’s ASML’s gloomy outlook earlier this week wiped out chip stocks around the world, Taiwan Semiconductor Manufacturing said Thursday it expects continued growth as it reported a 54% profit gain that beat expectations and rising demand for chips used in AI.
TSMC, the dominant maker of advanced chips used in AI applications and whose customers include Apple and Nvidia, has become a bellwether for the AI ​​story and its shares rose 6% in Frankfurt after its earnings report.
Nvidia shares also rose another 2% in after-hours trading.
TSMC is spending billions of dollars building new factories abroad, including $65 billion on three factories in the US state of Arizona, although it has said most production will remain in Taiwan.
With index futures on Wall Street moving higher ahead of Thursday’s bell, the news from Taiwan could lift both the S&P500 and Nasdaq back to record highs.
Helped by a strong earnings season so far for the major US investment banks, the broader market raced ahead on Wednesday. The small cap Russell 2000 posted its best close in almost three years and Dow Jones blue chips set another record after the index gained a foothold above 43,000 points.
Streaming giant Netflix is ​​next on the agenda, with investors looking for signs that emerging advertising revenues are accelerating. That’s important because it is expected to report about 4 million new subscribers — the lowest number in six quarters after a boom in a crackdown on password sharing.
Shares of Netflix are up 44% so far this year.
With the European Central Bank set to implement its third interest rate cut of the year later on Thursday – the first consecutive cut in thirteen years – the broader interest rate picture was also supportive.
The euro fell to its lowest level since early August against a generally stronger dollar ahead of the ECB’s decision.
European shares rose higher after a shaky week of disappointment from ASML and luxury goods maker LVMH, both hit by faltering Chinese demand and a looming trade war between Brussels and Beijing.
Chinese markets underperformed again and the offshore yuan hit its weakest level in almost two months as a lack of new stimulus from a closely watched housing policy briefing left some investors disappointed.
China will expand a “white list” of housing projects eligible for financing and increase bank loans for such developments to 4 trillion yuan ($562 billion), Housing and Urban-Rural Development Minister Ni Hong said.
But analysts said the details were just an extension of previously announced support and that some figures were disappointing.
Real estate stocks traded in China and Hong Kong fell 7.9% and 6.7% respectively, reversing the previous day’s gains.
China reports third-quarter GDP figures on Friday – and three-month annual growth is expected to have slowed to 4.5%, compared with 4.7% in the previous quarter.
Back on Wall Street, Treasury yields were steady, with the 10-year yield holding at 4% ahead of last month’s flurry of retail, industrial and weekly unemployment data.
With the labor market under scrutiny by the Federal Reserve as it considers its next interest rate move, disruptions in unemployment claims due to recent storms and strikes have made the number difficult to read.
Still, another Fed rate cut next month is almost fully priced in on the futures markets, and there was encouraging news on the inflation front at home and abroad.
US import prices fell the most in nine months in September, reflecting the decline in the cost of energy products and food.
And despite tensions in the Middle East, China-related concerns about global demand for next year have kept the oil market in check, leaving US crude stuck at $70 a barrel and down nearly 20% from last year around this time.
In deal news, shares of travel booking website Expedia Group rose 8% in after-hours trading after the Financial Times reported that taxi giant Uber was exploring a possible bid for the company. Uber shares fell about 2%.
Key developments that should give more direction to US markets later on Thursday:
* Policy decision of the European Central Bank and press conference with ECB President Christine Lagarde
* US Corporate Earnings: Netflix, Snap-on, Intuitive Surgical, Blackstone, Travelers, Truist, M&T, Elevance Health, Marsh & McLennan, Huntington Bancshares, KeyCorp
* September U.S. retail sales, industrial production, weekly unemployment claims, October Philadelphia Fed business survey, October NAHB housing index, August business and retail inventories, August TIC government bond data
* President Austan Goolsbee of the Federal Reserve Bank of Chicago
* European Commission President Ursula von der Leyen and European Council President Charles Michel hold a press conference after the European Union summit
* US President Joe Biden visits Germany
(mike.dolan@thomsonreuters.com; editing by Christina Fincher)
