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Micron (NASDAQ:MU) unveils a $40 billion plan to bring its semiconductor manufacturing business back to the US and US President Joe Biden prepares to sign the Science and Chips Rule into law. While Alibaba (NYSE:BABA) is heading in the other direction from Micron returning to the US, Hong Kong approved its plan to move its main list of companies from the US. Travel companies continue to produce healthy financial reports as the tourism boom looks good. Stocks were subdued before Wednesday's inflation report, and oil surged in a report that said Ukraine was blocking shipments of Russian crude to central Europe. Here's what you need to know in financial markets on Tuesday, August 9th.
1. Biden to sign Chip Rule, Micron outlines $40 billion investment plan
Chipmaker Micron announced a $40 billion investment plan by the end of the decade to grow its manufacturing base in the US, which relies heavily on government subsidies outlined in the recently passed Science and Chips Rule, and will be signed by US President Joe Biden on Monday. Tuesday.
The restructuring of manufacturing capacity reflects, among other things, national security concerns, resulting from the worsening of US-China relations over the past few years, which is clearly illustrated by China's reaction to US House Speaker Nancy Pelosi's visit to Taiwan last week. Most of Micron's production capacity is located in China and Japan.
The announcement comes as concerns grow over an oversupply of chips, following a pandemic-fueled surge in demand for equipment, computer games and cryptocurrencies. Competitor Nvidia (NASDAQ:NVDA) drastically cut its outlook on Monday, citing weakness in the game, in particular.
2. Alibaba heads to Hong Kong
Deglobalization goes both ways.
Hong Kong approved Alibaba's plan to move listings of its main market to the Hong Kong Stock Exchange, a counter-decision to Micron's return of manufacturing capacity to the US [see above].
In practical terms, the move would make it easier for Chinese investors to gain access to shares through a 'connected shares' program that links Hong Kong and China exchanges. Whether that will be sufficient to offset the more restricted access non-Chinese investors may face in the future remains questionable.
The move is likely to take place before the end of the year, according to various reports.
In China, Tesla's Shanghai plant saw production fall by two-thirds in July from the previous month, though that was due to scheduled maintenance rather than the effects of US-China tensions.
3. Stocks weakened before the release of inflation; Small businesses hit by inflation
US stock markets will open flat later, where the release of consumer price inflation on Wednesday provides a long shadow ahead.
Expectations for the achievement of peak inflation rates have grown. Market participants responded favorably to the tentative evidence of a decline in consumer expectations for inflation in the New York Fed's latest survey released on Monday. However, prices have repeatedly increased more than expected in recent months. Inflation is a major concern reported by small businesses in the recently released NFIB monthly report.
At 5:20 p.m. EDT, Dow Jones futures were little changed, while S&P 500 futures were down 0.1% and Nasdaq 100 futures were down 0.4%. From Indonesia, the JCI closed up 0.23% at 7,102.88 and the rupiah strengthened 0.15% to 14,852.5 per US dollar.
In addition to chipmakers, other stocks that are likely to be in focus later are International Flavors and Fragrances and News Corp. (NASDAQ:NWSA) after publishing good earnings reports late Monday. Emerson (NYSE:EMR), Sysco (NYSE:SYY), Transdigm and Ralph Lauren (NYSE:RL) all announced early financial results, while Wynn Resorts (NASDAQ:WYNN) released reports after the close.
Meanwhile, Bitcoin continued to decline 3.56% at 23,262.9 at 19.19 WIB BTC/USD. In addition, Nickel Futures are down 0.95% at 21,478.00 at 7:22 pm WIB, Tin are down 0.63% at 24,300.00 at ICE London on Monday’s close.
4. The travel sector is still the strongest in this earnings season
The global travel sector remains prominent in the current earnings season. Both the Dufry giant and the InterContinental Hotel Group both reported business lines that experienced previous recoveries. But IHG – owner of Crowne Plaza and Holiday Inn, is still down, having failed to match the good performance of rivals Hilton and Marriott.
Both companies noted that revenues have topped 2019 levels in North America, but Europe is lagging slightly (as pressure from the EU's ban on Russian tourists increases) and China is also lagging greatly, due to its zero-Covid policy. No one expected a significant drop in demand any time soon.
Norwegian Cruise Line (NYSE:NCLH) will continue its earnings performance results later.
5. Oil spike from Ukraine report
Crude oil prices are recovering in the perception of this new sell-off.
Markets were also supported as headlines suggested Ukrainian pipeline operator Ukrtransnafta had stopped sending Russian oil across the country's territory for customers in central Europe. This would be an unexpected escalation of the energy conflict between Russia and its European neighbors.
The headlines would imply Ukraine's frustration at Europe's continued purchases of Russian fuel – so-called to help finance the war – has heated up. The move comes a day after the Biden administration approved an additional $1 billion in military aid for Ukraine.
The American Petroleum Institute will release its weekly inventory data at 03.30 WIB, as usual.
Other commodities, Rubber 1.11% to 154.40 at Monday's close in Singapore, Newcastle Coal at ICE London ended at 361.00 levels in trading last Friday, and US Cocoa fell 0.36% at 2,331.50 at 7:23 pm WIB .