ASML Shares Jump on Report US Allies Exempt From Curbs | The Opening Trade 07/31

Bloomberg Television
31 Jul 202495:46

TLDRThe Bank of Japan's unexpected interest rate hike and reduced bond buying sparked market volatility, with the yen strengthening against the dollar. Earnings season continues with mixed results, notably HSBC's $3 billion share buyback boosting its stock. Tech stocks react to Microsoft's earnings miss, while geopolitical tensions impact oil prices and concerns grow over U.S. export restrictions on chip technology to China, potentially excluding allies like Japan and the Netherlands.

Takeaways

  • 📈 ASML shares surge reportedly due to the US potentially exempting its allies from chip export restrictions to China, which could positively impact Dutch chip equipment vendors.
  • 🏦 HSBC shares rise with a $3 billion share buyback announcement, demonstrating the bank's strong capital position and confidence in future performance despite interest rate fluctuations.
  • 📊 Mixed earnings reports are highlighted, with some companies like GSK upgrading guidance due to comfort in inflation, while others like Microsoft face stock punishment despite significant growth due to unmet expectations.
  • 🛫 Airbus reports better-than-expected results despite a profit warning and ongoing supply chain issues, with a focus on improving production and delivery in the second half of the year.
  • 🛍 L'Oréal's second-quarter results show disappointing sales growth, particularly in the dermatology unit and North Asia, including a decline in the Chinese market for the fourth consecutive quarter.
  • 📉 BBVA shares fall despite reporting earnings that beat estimates, possibly due to concerns over the bank's ongoing takeover deal and its implications for shareholders.
  • 🏢 The Bank of Japan's decision to hike interest rates and reduce bond buying is met with a muted market reaction, with the focus shifting to potential policy changes in September.
  • 🛑 Geopolitical tensions escalate with the killing of Hamas' leader in Tehran by an Israeli airstrike, which could have significant implications for the region and potentially impact oil prices.
  • 💡 The Fed's upcoming decision is anticipated to maintain a cautious stance, with market expectations pricing in multiple rate cuts and awaiting clarity on future monetary policy direction.
  • 🌐 The impact of geopolitical events on market sentiment is underscored, with the Middle East tensions and corporate earnings reports driving movements in individual stocks and sectors.

Q & A

  • What significant action did the Bank of Japan (BOJ) take regarding interest rates as discussed in the transcript?

    -The Bank of Japan (BOJ) decided to hike interest rates, a move that was unexpected by most economists and seemed to have a muted reaction in the market.

  • What was the market's initial reaction to the BOJ's interest rate hike?

    -The market appeared to be unmoved initially, with the yen gaining and then dropping, ending up unchanged ahead of the Federal Reserve's decision.

  • What is the general expectation for the Federal Reserve's (Fed) action in September?

    -The focus is on whether the Fed will cut rates in September, with the current market pricing in the possibility of 2-3 rate cuts for the year, despite the Fed's June dot plot suggesting one rate cut.

  • What impact did the earnings season have on the market, as mentioned in the transcript?

    -Earnings season has continued with mixed results, with some companies like HSBC and GSK hitting the wires and providing comfort in terms of inflation and upgrades in guidance, while others have been lackluster.

  • How did the report on the U.S. potentially exempting certain allies from chip export curbs affect ASML shares?

    -The report suggesting that the U.S. might exempt Japan, the Netherlands, and South Korea from chip export curbs led to ASML shares jumping significantly, reflecting a positive market reaction.

  • What was the context behind the significant growth reported by Microsoft and the market's reaction?

    -Microsoft reported a 29% growth, which was below the expected 31%, leading to the stock being punished despite the significant growth, indicating the market's high expectations.

  • What was the reason behind HSBC's share price increase?

    -HSBC's share price increased due to the announcement of a $3 billion share buyback, reflecting the company's strong capital ratio and confidence in its future performance.

  • What challenges did Airbus face that led to a profit warning?

    -Airbus faced challenges with supply chain issues and had to cut its annual delivery targets, leading to a profit warning and recording charges in the year.

  • How did L'Oréal perform in the second quarter, and what were the main factors contributing to this performance?

    -L'Oréal reported disappointing second-quarter results with misses across all units except for the luxury division. The dermatology unit, which includes skincare brands, saw a slowdown in growth, and North Asia, including China, reported a decline for the fourth consecutive quarter.

  • What geopolitical tensions were mentioned in the transcript, and how might they affect the markets?

    -The transcript mentioned escalating tensions between Israel and Hamas, with an Israeli airstrike reportedly killing a Hamas leader in Tehran. This development could potentially affect oil prices and market stability, given the region's significance to global energy supplies.

Outlines

00:00

📈 Market Tensions and Earnings Season Update

Anna and Kriti discuss the latest market movements, including the Bank of Japan's interest rate hike and its impact on the Yen. They also cover the earnings season, mentioning HSBC and GSK's performance, with HSBC announcing a share buyback. There's a focus on the macroeconomic situation ahead of the Federal Reserve's decision, with an emphasis on inflation and the potential for rate cuts. The conversation also touches on geopolitical tensions, particularly the US claim of an Israeli leader's death in Tehran.

05:01

🏛️ BOJ Decision Analysis and Market Reaction

Taro, a Bloomberg Japan economist, provides insight into the Bank of Japan's interest rate hike, discussing its significance and potential market reactions. The conversation revolves around the BOJ's policy direction, the impact of geopolitical events on the Yen, and the possible outcomes of the central bank's decisions. There's also a discussion on the FX market and the role of Japanese real money funds in capital flows.

10:09

📉 Mixed Earnings Reports and Tech Stock Performance

The hosts discuss the mixed results from the earnings season, highlighting Microsoft's stock punishment despite growth due to unmet expectations. They also talk about the performance of other tech companies like NVIDIA and the impact of business spending on market dynamics. The conversation includes a detailed discussion with Sonja Martin from DZ Bank on the Federal Reserve's potential actions and the implications for the markets.

15:11

🌐 Geopolitical Developments and Fiscal Policies

The script covers various geopolitical events, including the killing of Hamas' leader and the political landscape in the UK and the US. It also discusses the fiscal policies inherited from the Conservative government and the potential impact of the Federal Reserve's decisions on the markets. There's mention of the Project 2025 director stepping down and the implications for the GOP and President Trump's agenda.

20:12

💼 Business and Economic Insights with Sonja Martin

Anna and Kriti interview Sonja Martin, who provides her insights on the Federal Reserve's potential rate cuts, the timing of these actions, and the implications for the global economy. They discuss the potential impact of a Trump presidency on the Federal Reserve's decisions and the outlook for the ECB's policy. Sonja also shares her views on the euro-dollar reaction and the broader economic trends.

25:14

🛑 Central Bank Decisions and Market Anticipations

The conversation focuses on the decisions made by central banks, particularly the BOJ's interest rate hike and its market implications. Alicia Herrera discusses the BOJ's approach to bond buying and the potential impact on inflation and the Yen. There's also a discussion on the Federal Reserve's role in shaping market expectations and the importance of its press conferences.

30:20

📈 Yen Movements and Market Expectations

The hosts discuss the Yen's movements in response to the BOJ's decisions and the Federal Reserve's influence on the Asian markets. They talk about the market's reaction to the BOJ's hawkish language and the potential for further rate hikes. The conversation includes insights from Mark Cudmore on the technical aspects of the market and the impact of oil prices on the economy.

35:23

🌐 Global Market Overview and Individual Stock Performance

The script provides an overview of the global market situation, with a focus on individual stock performances. It discusses the impact of earnings reports from companies like HSBC, BBVA, and Airbus, as well as the potential implications of US export controls on technology companies. The conversation also touches on the geopolitical tensions affecting the markets.

40:28

🏦 HSBC's Earnings and Share Buyback Announcement

Anna and Kriti discuss HSBC's earnings report, which includes a $3 billion share buyback announcement. They talk about the bank's strong capital ratio and the confidence it demonstrates in its future performance. The conversation also includes an interview with HSBC CEO Noel Quinn, who explains the bank's strategy and its reduced sensitivity to interest rate declines.

45:30

🛍️ L'Oréal's Sluggish Growth and Market Impact

The hosts discuss L'Oréal's earnings report, which shows sluggish sales growth despite strong performance in certain areas. They talk about the challenges faced by the company in the dermatology unit and the impact of the Chinese market on its overall performance. The conversation also includes a comparison with other luxury brands like Prada and their market reception.

50:31

✈️ Airbus' Profit Beat and Aviation Industry Update

The script covers Airbus' earnings report, which beat expectations despite the company's struggles with supply chain issues. The CEO of Airbus discusses the challenges faced by the company and the steps being taken to address them. The conversation also includes an update on the aviation industry, with a focus on engine availability and delivery schedules.

55:34

🔄 Middle East Tensions and Their Global Implications

The hosts discuss the escalating tensions in the Middle East, particularly the killing of Hamas' political leader in an Israeli airstrike. They talk about the potential implications for the region and the global market, including the impact on oil prices and the reaction of other countries. The conversation also includes a discussion on the potential responses from Iran and other nations.

00:40

📊 Yen's Volatility and BOJ's Monetary Policy

Anna and Kriti discuss the volatility of the Yen following the Bank of Japan's decision to increase interest rates and reduce bond buying. They talk about the market's reaction to the BOJ's hawkish messaging and the potential implications for inflation. The conversation also includes insights into the unity between fiscal and monetary policy in Japan and the impact on market expectations.

05:44

🛒 Global Consumer Trends and Earnings Insights

The hosts discuss global consumer trends, particularly the challenges faced by companies like L'Oréal and Adidas. They talk about the impact of dermatology on the skincare industry and the performance of retail businesses. The conversation also includes a preview of upcoming earnings reports from companies like Boeing and Meta, as well as the potential implications of the Federal Reserve's rate decision.

Mindmap

Keywords

💡ASML Shares

ASML is a Dutch technology company that produces photolithography systems for the semiconductor industry. The mention of 'ASML Shares Jump' in the script refers to a significant increase in the market value of ASML's stocks, likely due to a positive market reaction to some news or report. In the context of the script, it is related to a report that the U.S. may exempt certain allies from restrictions on chip technology exports to China, which could potentially benefit ASML.

💡BOJ Hikes Interest Rates

BOJ stands for the Bank of Japan, which is the central bank of Japan. 'Hikes Interest Rates' refers to the decision by the BOJ to increase its benchmark interest rates. This is a significant monetary policy action that can affect the economy by influencing the cost of borrowing. In the script, it is mentioned that only 14 economists expected this hike, indicating it was a somewhat surprising move to market participants.

💡Earnings Season

Earnings Season is a term used to describe the period when publicly traded companies release their quarterly financial results. It is a key time for investors as they assess the performance of companies and make decisions based on these results. The script mentions 'Earnings Season Powers On,' suggesting that there is ongoing attention to corporate earnings reports and their impact on the market.

💡Geopolitical Tensions

Geopolitical Tensions refer to the strain in international relations due to political factors. In the script, it is mentioned that 'Geopolitical Tensions Shall in the FTSE,' which implies that political factors are influencing the performance of the FTSE 100 index, a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization.

💡Brent Crude

Brent Crude is a major trading classification of sweet light crude oil that serves as one of the benchmarks for global oil prices. The script mentions 'Brent Crude High,' indicating that the price of Brent Crude oil is at a higher level, which can be influenced by various factors including geopolitical events, supply and demand dynamics, and market speculation.

💡Microsoft Growth

Microsoft is a leading technology company known for its software products and services. The script discusses 'Microsoft Had 29% Growth,' which is a significant increase in some aspect of its business, possibly revenue or profits. However, the market 'punished' the stock because the growth was slightly below expectations of 31%, demonstrating how investor reactions can be influenced by whether a company meets or exceeds projected growth targets.

💡AI CapEx

AI CapEx refers to the capital expenditures made by companies in the field of artificial intelligence. In the context of the script, it is mentioned that there is a 'Jump in CapEx Investment' in AI, indicating that companies are investing heavily in AI technology. This is seen as a positive by markets, but there is an expectation that these investments should yield tangible results.

💡Fed Decision

The Fed Decision refers to the decision made by the Federal Reserve, the central bank of the United States, on monetary policy actions such as interest rate changes. The script mentions anticipation for the 'FED Decision,' highlighting the importance of the Federal Reserve's actions in shaping financial markets and the economy.

💡HSBC Buyback

A buyback refers to a company repurchasing its own shares from the market, often seen as a signal of confidence in the company's financial health and future prospects. The script mentions HSBC, a multinational banking and financial services organization, announcing a '$3 Billion Share Buyback,' which is a significant capital return to shareholders and a reflection of the company's strong financial position.

💡L'Oréal Sales Growth

L'Oréal is a French multinational cosmetics and beauty company. The script discusses 'L'Oréal Reports Sluggish Sales Growth,' indicating that the company's increase in sales is slower than expected. This can be a concern for investors as it may signal weaker consumer demand or challenges in the market.

Highlights

ASML shares surge on reports that US allies might be exempt from chip export curbs.

BOJ's unexpected interest rate hike leaves Yen unchanged ahead of the Fed meeting.

Earnings season continues with mixed results from major companies like HSBC and GSK.

Microsoft's stock punished despite growth due to not meeting expectations.

Bloomberg's Japan Economist Tarbor discusses the significance of the BOJ's interest rate hike.

FX story and oil geopolitics suggest a major theme out of Venezuela.

Anna and Kriti discuss the implications of the BOJ's decision on the markets.

Analyst Sonja Martin shares insights on the BOJ's press conference and its impact.

Alicia Herrera comments on the BOJ's bond buying case and the implications for the Yen.

HSBC's CEO Noel Quinn discusses the bank's $3 billion share buyback and future targets.

Airbus's earnings report includes a profit warning and a review of its space division.

L'Oreal reports sluggish sales growth, particularly in the dermatology unit.

Middle East tensions rise with the reported killing of Hamas's leader in Tehran by Israel.

Oil prices respond to geopolitical news, with potential implications for supply.

Markets react to mixed earnings reports and geopolitical developments.

Analyst Morgane Delle Donne discusses the impact of tech investments on company earnings.