What’s going on here?

Chipmaking equipment maker ASML might finally be affected by the industry’s downturn, and it can only rely on its emergency backup for so long.

What does this mean?

ASML sells the machines that companies use to make advanced chips, but it’s been able to shrug off a slumping chip industry and lethargic demand for electronics for months. But no longer: the firm’s order intake halved last quarter from the same time last year, hitting its lowest level since 2020. Still, the Dutch firm had a big enough backlog to cushion the blow. So with chipmakers installing its hardware faster than you could polish off a plate of chips and dip last quarter, ASML managed to double its revenue and almost triple its profit. But if investors were impressed, they hid it well: they ignored the company’s better-than-expected outlook for this quarter to send shares down 5%, spooked by the dropoff in ASML’s orders.

Why should I care?

The bigger picture: When the stars align.

ASML might’ve worked through some of that order backlog, but there’s still a chunky $40 billion left over. And there might be more opportunity ahead: governments around the world are racing to build more chip plants on home ground to avoid déjà vu of pandemic-induced supply hiccups. The US alone, for example, has received over 200 applications for its $40 billion chip production program. So there’s that, and there’s the anticipation of more demand from recently reopened China to boot.

For markets: Empty your cups.

Investors might have been a bit too cup half-full about the sluggish chip industry. An index tracking some of the biggest chip stocks has bloated 20% this year, double the S&P 500. Plus, its price-to-earnings ratio is verging on the peak levels of two years ago, when chipmakers couldn’t keep up with fired-up demand. But with the likes of TSMC disappointing for the second-straight quarter, analysts will no doubt be getting cold feet.

What’s going on here?

Data out on Wednesday showed the UK’s far from being set free from its troubled relationship with inflation.

What does this mean?

The good news: the Bank of England (BoE) previously signaled it might pause economy-curbing interest rate hikes if inflation calms down. The bad news: those pressures show no signs of letting up. Instead, the price of goods and services in the UK rose 10.1% last month from the same time last year – a slight dip from February’s 10.4%, true, but higher than the 9.8% economists expected. That has a lot to do with food and non-alcoholic drinks marking their sharpest price rises in 45 years, canceling out lower prices at the pump. So sure, the BoE might be full of good intentions, but now’s probably not the time to match bark with bite.

Why should I care?

For markets: Check the cheques.

There’s another reason for the BoE to be cautious. Data out earlier this week showed UK wages rose way more than expected in the three months through to February. And since wages are a key driver of inflation, that – and Wednesday’s data – might be why traders are now pricing in two more 0.25 percentage point hikes in May and June, and bracing for peak interest rates of over 5%. Plus, with high prices already pushing more folks back into work, it seems there’s no relief in sight for British households.

The bigger picture: Bad luck, Brits.

US and European inflation have taken a breather lately, but the UK’s painful prices aren’t pausing for a second. That’s at least partly down to the “B” word: a think tank study shows there are nearly half a million fewer workers in the UK than before Brexit, in turn forcing companies to up their wages to reel in staff – not to mention the longer delivery times and inflation-driving higher import costs that came with so-called independence.