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TSMC shares spike despite sales miss

 

Friday, January 13, 2023, 8.45am GMT

The news shaping the markets today

Top EU officials plan to visit Ukraine’s capital city Kyiv on February 2 to meet government members, the European Commission spokesperson said. The US dollar index traded slightly higher this morning.


China’s trade surplus narrowed to $78 billion in December, from $93.7 billion in the year-ago month. However, the latest reading came in higher than the consensus estimates of $76.2 billion, lending support to the CNY/USD forex pair.


Bank of Korea raised its base rate by 25bps to 3.5% at its January meeting, in-line with market estimates. The KRW/USD pair declined slightly in forex trading this morning.


Australia’s value of new home loans declined 3.8% to A$16.4 billion in November, recording a downturn for the sixth consecutive month, which exerted pressure on the AUD/USD forex pair.


Argentina’s monthly inflation rate increased to 5.1% in December, from 4.9% in the previous month. However, the recent reading came in lower than market estimates of 5.2%. The ARS/USD pair remained almost flat in forex trading this morning.

 

What’s happening: Shares of Taiwan Semiconductor Manufacturing Company Limited gained on Thursday after the company reporting results for its fourth quarter.

What happened: The Hsinchu, Taiwan-based company reported better-than-expected earnings for its latest quarter.

However, revenues for the world’s largest contract chipmaker came in below market estimates, and management also projected weak revenues for the first quarter.

How were the results: The leading chip supplier for Apple reported a sharp year-over-year surge in both top- and bottom-line figures for the fourth quarter.

  • Net revenues surged 42.8% year-over-year to NT$625.53 billion. Revenues in US dollar terms climbed 26.7% year-over-year to $19.93 billion, versus the consensus estimates of $20.56 billion.
  • Net income jumped 78% year-over-year jump to NT$295.904 billion, exceeding Wall Street expectations of NT$287.8 billion.

Why it matters: Taiwan Semiconductor Manufacturing is the biggest chip supplier in the world, with its chips being used in several end markets.

At the end of last year, TSMC said it had started mass production of its most advanced 3nm processor node technology and was looking to ramp up production outside Taiwan. The company is currently constructing a second chip factory in Arizona, which will begin production in 2026.

The company’s operating margins widened to 52% in the fourth quarter, from 50.6% in the third quarter.

“Despite the continued ramp-up of TSMC’s industry-leading 5nm process, TSMC’s revenue performance in the fourth quarter was still affected by weak end market demand and customer inventory adjustments,” CFO Huang Renzhao said during the earnings call.

TSMC said it sees the overall economic situation remaining weak during the current quarter, which could impact its performance.

The company said it expects revenues to decline as much as 5% in the first quarter. Management also announced plans to reduce annual investments. TSMC sees growth returning during the second half of this year.

How shares responded: TSMC’s shares gained 6.4% to close at $87.00 on Thursday, following the release of quarterly results. The stock has added around 7% over the past six months.

What to watch: Investors will keep an eye on earnings results from Apple on February 2, 2023, which are expected to provide some insight into the overall demand pattern for chips.

The markets today

US stocks will be in focus ahead of a basket of economic reports

Context: Wall Street recorded gains on Thursday, following the release of inflation data.

Details: Data released Thursday showed inflation easing, which increased speculations of the US Federal Reserve slowing its rate increases ahead. However, markets remained concerned that the country’s central bank will not pause its monetary policy tightening anytime soon.

The Labor Department said that US consumer prices rose 6.5% on an annual basis in December, recording the smallest increase since October 2021. CPI eased from 7.1% in the previous month. However, the headline inflation rate remained well above the Fed’s 2% target.

Other data released showed initial jobless claims declining by 1,000 to 205,000 in the week ending January 7. The US government budget deficit almost quadrupled to $85 billion in December, versus $21.3 billion in the year-ago period.

The Fed had raised the key interest rate by 50 basis points in December, following four back-to-back rate hikes of 75 bps.

Philadelphia Fed President Patrick Harker acknowledged that prices are moderating but stressed that the monetary policy needs further tightened to bring the inflation rate down to the Fed’s target level.

US stocks swung between gains and losses in a volatile session following the release of inflation data, with the Nasdaq 100 losing more than 1% at one point on Thursday.

However, the major indices recovered losses later, with the Dow Jones index gaining 217 points to close at 34,189.97. The S&P 500 gained 0.34% to 3,983.17, while the Nasdaq 100 climbed 0.50% to settle at 11,459.61.

What are expectations: Investors await data on import prices, export prices and consumer sentiment from the US today. US import prices, which declined 0.6% in November, are expected to decline 0.6% in December. Analysts expect export prices to decline 0.5% in December following a 0.3% drop in November. The University of Michigan consumer sentiment, which was revised higher to 59.7 in December, is likely to fall back to 59 in January.

Markets will also keep an eye on the start of the earnings season, with big banks, including JPMorgan Chase, Citigroup and Wells Fargo, set to report earnings today.

Other Markets: European trading indices closed higher on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 up by 0.89%, 0.74%, 0.74% and 0.63%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0844 and 1.0849 Negative
USD/CHF – 0.9286 and 0.9292 Negative
Silver – 23.940 and 23.964 Positive
WTI Crude Oil   – 78.10 and 78.37 Negative
Dow Jones – 34128.90 and 34227.84 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0845, -0.08%) Dow ($34,256, -0.18%) Brent ($83.74, -0.4%)
GBP/USD (1.2200, -0.10%) S&P500 ($3,993, -0.27%) WTI ($78.22, -0.2%)
USD/JPY (129.13, -0.13%) Nasdaq ($11,482, -0.45%) Gold ($1,901, 0.1%)

What else to watch today

UK’s GDP, Industrial production, manufacturing output, goods trade balance, balance of trade and construction output, France’s consumer price index, Spain’s inflation rate and consumer confidence indicator, Germany’s full year GDP growth, Italy’s industrial production, Eurozone’s balance of trade and industrial production, Russia’s total vehicle sales, inflation rate and foreign exchange reserves, India’s foreign exchange reserves, value of deposits, value of loans and balance of trade, Brazil’s IBC-Br economic activity index, US Baker Hughes crude oil rigs, China’s foreign direct investment, as well as South Africa’s SACCI business confidence index.

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