Reality always intrudes in the end. That is why stock markets so often buy rumours and sell facts, moving immediately on to the next set of imagined events. So evidence filtering through of the true extent of recovery does not bode well for a faltering market rally – the FTSE All-World Index has fallen 5 per cent in 10 days. The semiconductor equipment sector, one of the world's more volatile and cyclical businesses, is a case in point.

Companies such as Applied Materials of the US and Europe's ASML – which make the machines that chip companies then use to turn silicon wafers into tiny circuit boards – should be in for a good year. Chipmakers began cutting back in late 2008 in response to overcapacity and the recession. A year ago more than half of manufacturing capacity was still idle. But capacity utilisation had risen to 80 per cent by the end of last year, estimates iSuppli, and is expected to rise further. After three consecutive years of decline, the industry consultants forecast global spending on new machinery by the chipmakers to rise a vigorous 47 per cent this year.

However, stock prices have already anticipated recovery. With Applied Materials up by half, and ASML more than doubling, the sector has been on a tear since late 2008. Yet their customers have a tendency to overinvest and then suffer the consequences. Tool shipments are running at a rate suggesting annual semiconductor capital spending of $40bn to $50bn, a level that has tended to cause meaningful rises in chip manufacturing capacity in the past.