Welcome to Michael Kramer’s pick of the top three market events to look out for in the week beginning Monday 3 February.
It will be a busy week for US corporate earnings, with companies including Google-owner Alphabet, Amazon and AMD reporting fourth-quarter and full-year results. Economic data will also be front and centre in the US, with the non-farm payrolls print and unemployment rate out on Friday and, earlier in the week, the Institute for Supply Management’s (ISM) manufacturing and service sector reports. Across the pond, the Bank of England will hold its rate-setting meeting on Thursday.
Note: Michael Kramer and his clients at Mott Capital Management are long-term owners of shares in Alphabet – Class A [GOOGL].
Alphabet Q4 results
Tuesday 4 February
Analysts expect Alphabet to report that earnings grew 29.6% to $2.13 a share in the fourth quarter, driven by revenue growth of 11.9% to $96.6bn. Advertising revenue is expected to be up 9.4% at $71.7bn, while traffic acquisition costs (TAC) are projected to have climbed 7.4% to $15.0bn. Meanwhile, capital expenditure is expected to have increased 20.2% to $13.2bn. The tech giant does not provide revenue projections, but analysts anticipate first-quarter revenue growth of 11.5% to $89.8bn, and a 17.2% rise in capex to $14.1bn. Based on the options market, the Google parent company’s Class A shares – which have gained 6% since the turn of the year to close a notch above $200 on Thursday – are expected to move approximately 6.7% higher or lower following the results.
The shares are now testing a key resistance level, having tried and failed to breach decisively above $200 on several occasions since mid-December, as the below chart shows. However, there is a case to be made that Alphabet has formed an ascending triangle, a generally bullish pattern suggesting that the stock may eventually break out and move higher. That said, the relative strength index, shown below the price chart, is trending lower, indicating weakening momentum. That suggests that the Nasdaq-listed stock could trade lower after the Q4 results are released as implied volatility resets. Additionally, with options market calls appearing to outnumber puts, unfavourable hedging flows could pressure the stock. A break of support at $192 could potentially lead to a drop back to $181.
Alphabet – Class A share price, May 2024 - present
Bank of England rate decision
Thursday 6 February
The market expects the Bank of England to cut interest rates by a quarter of a percentage point on Thursday. The UK’s base rate currently sits at 4.75% after cuts in August and November last year, and a rate hold in December. While a February rate cut appears nailed on (a 92% probability, according to interest-rate swaps data), the crucial question of what happens next is harder to answer. The market remains uncertain about the path for monetary policy moving forward, with the next rate cut after Thursday unlikely to come until June at the earliest.
The upcoming rate decision could be market-moving for GBP/USD. The pound has strengthened over the past couple of weeks, and this week has stabilised above the $1.24 level. The pair could rise to around $1.26 if the Bank of England lowers rates as expected. The pound has broken above a downtrend (the red line on the below chart) against the dollar, and the relative strength index has turned higher – two positive developments for the pound that could help propel it towards the next resistance level around $1.2622. For GBP/USD to move lower in the near term, governor Andrew Bailey and his fellow committee members would need to strike a dovish tone hinting at a further rate cut at the subsequent meeting on 20 March, a move that at this stage appears unlikely.
GBP/USD, January 2022 - present
US January jobs report
Friday 7 February
Economists estimate that the US economy added 160,000 payrolled workers in January, down from 256,000 in December. The unemployment rate is expected to remain unchanged at 4.1%. Meanwhile, average hourly earnings are projected to be up 3.8% in the year to January, easing from December’s 3.9% uptick.
While solid, these estimates do not suggest the market expects a blowout report. However, a stronger-than-expected payrolls reading could boost the dollar against the euro, potentially bringing the euro’s recent rally to an abrupt end. The most significant risk for the euro is a break below the downtrend that formed in October, as that could signal the failure of the recent breakout attempt. In this scenario, EUR/USD might fall below $1.025, potentially putting the two currencies back on track to hit parity in the near term.
EUR/USD, January 2022 - present
Key economic and company events
The coming week’s major economic announcements and scheduled US and UK company reports include:
Monday 3 February
• Australia: December retail sales
• China: January Caixin manufacturing purchasing managers’ index (PMI)
• Eurozone: January flash harmonised consumer price index (CPI)
• US: January ISM manufacturing PMI
• Results: Palantir (Q4)
Tuesday 4 February
• New Zealand: Q4 unemployment rate and employment change
• UK: January like-for like retail sales
• Results: Advanced Micro Devices (Q4), Alphabet (Q4), Amgen (Q4), Apollo Global (Q4), Chipotle Mexican Grill (Q4), Diageo (HY), Electronic Arts (Q3), Fox Corp (Q2), KKR (Q4), Merck (Q4), Mondelez (Q4), PayPal (Q4), PepsiCo (Q4), Pfizer (Q4), Snap (Q4), Spotify (Q4), Vodafone (Q3)
Wednesday 5 February
• China: January Caixin services PMI
• US: January ISM services PMI, January ADP jobs data
• Results: Arm (Q3), Boston Scientific (Q4), Fiserv (Q4), Ford (Q4), GSK (Q4), MicroStrategy (Q4), Qualcomm (Q1), Santander UK (Q4), Uber (Q4), Walt Disney (Q1)
Thursday 6 February
• Australia: December imports, exports and trade balance
• Eurozone: December retail sales
• UK: Bank of England interest rate decision
• US: Weekly initial jobless claims to 31 January
• Results: Amazon (Q4), AstraZeneca (Q4), Bristol-Myers Squibb (Q4), ConocoPhillips (Q4), Eli Lilly (Q4), Honeywell (Q4), Intercontinental Exchange (Q4), Linde (Q4), Philip Morris International (Q4), Roblox (Q4), Yum! Brands (Q4)
Friday 7 February
• Canada: January unemployment rate and net change in employment
• US: January jobs data, including non-farm payrolls and average hourly earnings
• Results: Fortive (Q4)
Note: While we check all dates carefully to ensure that they are correct at the time of writing, the above announcements are subject to change.
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