Beat the Street: ECB surprise hike; US retail and jobs data; ARM; UAW; Chevron

(Partial Video Transcript)

Tech stocks rally ahead of ARM's return

Hello, I'm Angeline Ong and welcome to Beat the Street, the show that gives you all the tradeable news and data ahead of the Wall Street Open. Coming up, European Central Bank (ECB) and US data on debt, ECB raising rates to 4.5% versus 4.25% and investors also eyeing those US retail and jobs data points.

Tech stocks are rallying ahead of ARM’s return to the market, ARM valued at $54.5 billion. Also, at strike-hit Chevron Australia, shutting some 25%, about a quarter of its LNG production, the very same day that unionised workers are escalating strike action there.

Good afternoon and a warm welcome to you. Welcome to this new edition of Beat the Street. Not long now before Wall Street starts trading. Let's just have a look at the chart here. Early indications are for a pretty tepid start. Not surprising given there's so much on deck for investors to digest.

We've also just had the data coming out from the US as well. I'll get that to you in a moment. Just taking a look at the US Tech 100 there ahead of ARM's details.

Raised ECB rate raises eyebrows

One of the things that we've been keeping an eye on is, of course, the ECB number. ECB, of course, shocking the market, raising rates to 4.5% versus 4.25%. Let's cross over to Chris Beaton, who's been taking a closer look at this.

AO: What do you make of the move, Chris?

CB: The ECB's really been dragged into this last hike, I think. The message from the statement is very much: "That's it, everyone, we've reached rates. We've been to a level to bring down inflation."

And you can see from their action near a dollar, the market is now sceptical that we will see another hike. Of course, going into the meeting, really, those ones originally were spontaneous.

Those leaks on Tuesday night, they really confirmed that a leak was certainly on the cards. And that has delivered as expected. But it's the message of that probably is for the time being.

We can probably need a big shift higher in Euro Zone inflation to really get them to move on rates once again. So that's why you've got the euro dropping against the dollar, and you've got euro communities rallying off their loans.

And that sets us up for an interesting afternoon now that the meeting itself is out of the way.

Waiting on tenterhooks for Lagarde's speech

AO: Chris, we're also waiting on ECB President Christine Lagarde's speech in just a few minutes' time. What do you expect her to say?

CB: Well, this is the key thing, really. Lagarde has said quite a bit that could still upset things. We shouldn't assume maybe that we're done with volatility in the Euro Zone and that the sellers have the advances for the rest of the afternoon, really.

I think the main thing is that we could see more downside, really, if they continue to really hammer this home that this is it for the time being, really. And that would certainly give European industries the break they've been looking for, really. They've been quite under pressure the last few days.

And the week here is just the ticket to give them that initial lay-up they need to start a more substantial rally.

Inflation genie still not back in the bottle

Thanks very much, Chris. We'll be keeping a close eye on what she says. The ECB raising its benchmark refinancing rate to 4.5% versus 4.25%. Of course, the expectation, according to a Reuters poll, is 4.25%.

What is also key now is also to see what the ECB says about reinforcing its targets in terms of inflation, because data points are showing an uptick at suddenly high inflation despite everything that's been done in terms of rates by the ECB, unable to bring that inflation genie properly back in the bottle.

I also want to talk about another big story that we are looking at today. Of course, as I mentioned earlier, we've got tech shares rallying ahead of ARM's debut, showing you the US Tech 100 there.

We've got NVIDIA, Intel, AMD, Broadcom, QUALCOMM, Micron Technology, which stock isn't moving higher after this anticipation of ARM's debut.

ARM's IPO return is significant

For those of you who have been following this, ARM's initial public offering (IPO) return to market is not only big because of how much it has raised, but because it comes at a time when there's been a drought in the IPO market.

ARM, the chip-design firm that supplies core technology to companies, including Apple and Nvidia, pricing its initial public offering at $51 a share. This would make its fully diluted market cap at more than $54 billion at the 51 offer price. The offering is also at the top end of ARM's expected price range of $47 to $51.

The company will start trading under the symbol ARM. Now, provided that the 95.5 million shares are sold, this would raise $4.87 billion for SoftBank. Is that a good deal for SoftBank?

Well, valuations at $54 billion is about $10 billion lower than ARM's valuation when SoftBank bought the 25% it did not already own. But it is $14 billion higher than the price it agreed. And also what's interesting, this is the price it agreed with Nvidia before the transaction was aborted.

Chip firm rides AI frenzy

ARM is riding the wave of excitement around AI as it aims to crack open the tech IPO market after a nearly two-year drought. It's set to be the most significant tech offering of the year.

Now, staying with tech and AI after the closing bell, Adobe is forecast to post earnings of $3.97 a share. This would be a 17% rise on the same quarter a year ago. Sales seen rising 10% year on year to $4.87 billion.

[...]

That's it for this edition of Beat the Street, the show that follows the trading action, helping you position yourself ahead of the opening bell. For more trading insight, do follow us on at ig.com and @Angelina Ong on Twitter. This is IGTV. Take care.