British chipmaker Arm (ARM) continued to impress investors on Friday, as its shares rose almost 5% in premarket trading. The company, which debuted on public markets on Thursday with a near-25% rise, is seen as a leader in the semiconductor industry and a potential rival to US giants like Intel and Nvidia.
Arm, which was spun off from Japanese conglomerate SoftBank, designs chips that power most of the world’s smartphones, tablets, and laptops. The company also has a growing presence in the cloud computing, artificial intelligence, and internet of things markets. Arm’s revenue grew by 28% in the first half of 2023, reaching $2.8 billion.
Analysts have praised Arm’s business model, which involves licensing its chip designs to other manufacturers and collecting royalties from each device sold. This allows Arm to avoid the high costs and risks of chip fabrication, while benefiting from the growing demand for its technology. Arm also has a diverse customer base, which includes Apple, Samsung, Huawei, Qualcomm, and Amazon.
China’s economic rebound
Arm’s rally was part of a broader global stock market surge on Friday, as investors welcomed better-than-expected economic data from China. The world’s second-largest economy reported that its industrial output rose by 5.3% year-on-year in August, beating the consensus forecast of 5.1%. Retail sales also increased by 2.5%, rebounding from a 1.1% decline in July.
The data suggested that China’s economy was picking up steam after a slowdown caused by the Delta variant of the coronavirus and regulatory crackdowns on various sectors. China has been one of the first countries to recover from the pandemic, thanks to its strict lockdowns and mass vaccination campaigns. However, it still faces challenges from supply chain disruptions, power shortages, and geopolitical tensions.
Oil prices near 2023 highs
Another factor that boosted stocks on Friday was the continued rise in oil prices, which reached their highest levels since 2018. WTI crude (CL=F) and Brent (BZ=F) futures were trading above $90 and $95 per barrel respectively, as demand for fuel outstripped supply amid a global energy crunch.
The oil market has been supported by several factors, including the slow recovery of production in the US Gulf Coast after Hurricane Ida, the OPEC+ group’s decision to stick to its modest output increase plan, and the declining inventories in major consuming countries. Oil prices have also been lifted by the expectations of stronger economic growth and inflation in the US and other developed nations.
Market outlook
The positive sentiment in the stock market was also reflected in other indicators, such as bond yields and currency movements. The yield on the 10-year US Treasury note rose to 1.38%, indicating that investors were more confident about the prospects of the US economy and less worried about the impact of the Fed’s tapering plans. The dollar index (DXY), which measures the greenback against a basket of six major currencies, fell to 92.6, as traders sought riskier assets.
The Wall Street benchmarks rallied on Thursday, after retail sales and wholesale price inflation for August came in hotter than expected. Those signs of resilience in the US consumer and of persistent price pressures make a case for more Fed rate hikes but also were signs that the Fed could be leading the US economy on the path to a soft landing.
The S&P 500 (^GSPC) closed at a record high of 4,505.10, up 0.84%. The Dow Jones Industrial Average (^DJI) gained 0.96% to end at 34,907.11. The Nasdaq Composite (^IXIC) advanced 0.81% to finish at 13,926.05.
Category: Business
Meta Description: Arm shares rose almost 5% on Friday, as China’s economic data boosted global stocks. Oil prices also reached their highest levels since 2018.
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