By Eamon Quinn
Boosted by a speech by US president Donald Trump that was deemed more measured and presidential, and helped by relief over impressive results by giant chip maker Intel, European stockmarkets rose and many US stocks hit record highs.
However, the extra fuel added to US markets for another week will only heighten fears about a correction eventually burning through sky-high company valuations.
Speaking at the World Economic Forum in Davos in Switzerland, Trump hailed his achievement in securing US tax cuts for the first time in 40 years; praised US companies like AT&T for paying out bonuses to employees; and signalled out Apple CEO Tim Cook for what the iPhone maker estimated earlier this month as its $350bn (€282bn) injection into the US economy.
The tax cut “has had an incredible impact on the stockmarket and the stock prices,” said Trump.
“We have set 84 records since my election — record stockmarket prices meaning we hit new highs 84 different times out of a one-year period ...in all fairness before we passed the tax cuts and tax reforms,” he said.
However, analysts said it was what the president hadn’t said that helped support stockmarkets.
“Fresh highs for US markets come as investors keep a close eye on the US president’s comments in Davos.
"Someone appears to have carefully written Trump’s remarks with a view to making him more palatable to foreign leaders, reasoning that a more conciliatory tone will produce results.
“Equity markets have been on the march again,” said online broker IG’s Chris Beauchamp.
Dylan Simmonds, market analyst at Merrion Capital, said Trump’s Davos speech went better than many market observers had expected, but there was a muted reaction to the speech itself.
The story of the week was that the weakness of the dollar was helping US exporters and helping boost US stocks further, Simmonds said.
Intel shares rose up to 7%, to their highest for two decades, boosted by a relief rally that its earnings had not been hit by the recently disclosed defects in its chips it supplies to mobile phone makers, he said.
The chip maker added nearly $15bn to its market value and hitting highs last seen in September 2000 in the dotcom boom.
Investors were also comforted by Intel’s assurances that it does not expect any material impact from the recent disclosure of security flaws Spectre and Meltdown in billions of its chips.
The company helped found the personal computer industry and became one of the world’s biggest chipmaker on the back of growing demand for PCs.
However, in the last few years, falling PC demand has pushed Intel to focus on making chips for data centres to offset revenue loss.
Revenue from the company’s higher-margin data centre business jumped about 20% to $5.58bn.
“Intel is successfully navigating the transition from a PC-centric to data-centric company — specifically, Intel’s data-centric businesses now comprise about 47% of revenue,” Credit Suisse analyst John Pitzer said.
And the business is showing no signs of slowing down. Intel forecast its data centric unit to grow mid-teens and PC centric business in the low single digits this year, projecting overall revenue growth of 4% to $65bn.
Analysts said Intel will benefit this year from higher demand for gaming computers, memory chip ramp and increased modem sales to Apple’s iPhones.
Intel has been increasingly displacing Qualcomm as Apple’s key modem supplier after its relationship with the iPhone maker soured last year over chip prices.
Shares in Apple, which reports earnings next week, have lost ground this week, and were trading at levels of late December.
Additional reporting Reuters