Chip Shortages, Jobless Claims, ECB, Musk Lifts Bitcoin

By Geoffrey Smith — Intel (NASDAQ:INTC) reports earnings against a backdrop of mounting speculation that the global chip shortage may be peaking. Jobless claims and existing home sales shed light on the economy’s momentum, while the European Central Bank is expected to take a more aggressive approach to generating inflation as it starts implementing its new strategy. Earnings continue apace elsewhere with updates from AT&T (NYSE:T), Biogen (NASDAQ:BIIB) and Abbott Labs among many others. Bitcoin touched its highest in a week after Elon Musk again switched his opinion on it. Here’s what you need to know in financial markets on Thursday, 22nd July. 

1. Intel eyed after Texas Instruments casts doubt on chip sector outlook

Intel will report quarterly earnings after the close, against a backdrop of mounting suspicion that the global chip shortage, which has scarred many manufacturers’ quarterly reports, may be about to start easing.

Texas Instruments (NASDAQ:TXN) management on Wednesday conspicuously guided for revenue in the current quarter well below consensus forecasts and analysts on an earnings call were concerned by the conservatism of its outlook. It’s only a week since Taiwan Semiconductor Manufacturing had said it expects chip shortages to ease significantly in the second half of the year. Texas Instruments stock fell 4% in premarket.

For now, though, such shortages continue to hurt. Toyota (NYSE:TM) became the latest automotive company to announce fresh production stoppages due to component shortages from southeast Asia

2. Jobless claims and existing homes sales

U.S. jobless claims are expected to have ground a little lower last week, despite signs that the U.S.’s economic momentum may be slowing due to the renewed spread of Covid-19. Initial jobless claims, due at 8:30 AM ET (1230 GMT), are seen at 350,000, down only 10,000 from last week’s figure.

Of more importance may be the overall number of people claiming some sort of government dole, which fell below 14 million for the first time in over a year last week. The broader figure will be scanned for evidence that the withdrawal of enhanced unemployment benefits by some states is succeeding in bringing people back into the labor market.

At 10 AM ET, existing home sales may add further evidence that the housing market is cooling due to higher prices and borrowing costs. Homebuilder DR Horton (NYSE:DHI)’s guidance and earnings will round out the picture further.

The Kansas City Federal Reserve’s regional manufacturing survey is due at 11 AM ET.

3. Stocks set to grind higher as earnings continue to impress

U.S. stocks are set to open higher later on continued optimism generated by what has largely been a strong earnings season – albeit one helped by extremely weak year-earlier comparisons.

By 6:15 AM ET, Dow Jones futures were up 74 points, or 0.2%, while S&P 500 futures were up 0.2% and Nasdaq 100 futures were up 0.1%.

 Abbott Laboratories (NYSE:ABT), Biogen and Danaher (NYSE:DHR) lead the early roster of earnings releases and come after some extremely strong numbers from elsewhere in the healthcare and medical goods sector. AT&T’s (NYSE:T) breakout of HBO numbers will add context to Netflix’s disappointing subscriber data earlier this week, while Dow will shine a light on cyclical stocks’ momentum.

4. ECB to give new guidance as dollar pressures EMFX

The European Central Bank is expected to shift to a more dovish forward guidance at its regular policy meeting, after adopting a new inflation strategy last week that allows it a slightly higher tolerance of inflation. Whether it can meet a target higher than the one it’s undershot for the last 10 years is another question. President Christine Lagarde’s press conference begins at 8:30 AM ET (1230 GMT).

Central banks elsewhere are also busy. Bank Indonesia declined to cut its key rates, despite having cut its growth forecasts earlier in the week due to spiraling Covid-19 cases. Ukraine’s National Bank, at embroiled in one of its periodic wars with the government over political interference, is also expected to keep rates unchanged at 7 AM ET.

Emerging market central banks around the world are coming under pressure to tighten monetary policy as the dollar’s recent strength puts pressure on their currencies.

5. Bitcoin hits 1-week high after Musk’s latest boost

Bitcoin rose to its highest in a week after Elon Musk told a panel discussion that Tesla (NASDAQ:TSLA) will “most likely” start accepting it as payment again.

Musk’s latest flip-flop come some weeks after he suspended plans to allow customers to pay in Bitcoin amid criticism of the cryptocurrency’s carbon footprint. 

By 6:15 AM ET, Bitcoin was off its overnight highs at $31,879, but still up 1.5% on the day. Other crypto assets, which sold off sharply in the risk-off move that spilled into the start of this week, were also higher, with Ethereum gaining 4.7% and DogeCoin 2.3%.

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