Alphabet Earnings a Key Hurdle For the Tech Trade: 3-Minutes MLIV

[00:00:00]We are looking ahead to tech earnings. We're still dealing with a very volatile AI story. And I don't know if tech earnings are going to calm down our thinking on that front.

[00:00:08]What's what's ahead for you this, uh, this trading day.

[00:00:11]Yeah. So I think looking forward, I think the key thing is these alphabet earnings after hours really kind of kicks off things for hyperscalers before things get a little bit busier next week.

[00:00:19]I think, you know, my colleague Anthony Stevens flagged that one day vol hyperscale earnings day is higher than it is on FMC day.

[00:00:25]So this is a big deal for us to look out for.

[00:00:27]In terms of Google's earnings specifically.

[00:00:29]A lot of focus is going to be on the CapEx space.

[00:00:32]So we saw last month that $80 billion equity raise sent the shares lower.

[00:00:36]And so there's a high sensitivity to what we're hearing on the CapEx.

[00:00:40]And, you know, a lot of focus is also, you know, on how much they kind of thread the needle. We don't want to see too high a CapEx, as you know, it could be fears of overbuilding and then an undershoot could potentially be, you know, more of a detrimental story to the broader AI infrastructure story. At the same time, also need to see some evidence of monetization. You know, some signals on that haven't been relatively positive. We've seen delays to Gemini.

[00:01:01]We've seen top talent leaving. So those are the key things to watch.

[00:01:04]The more broadly I think the trade is, you know, if you do see a well received report, what happens with tech as a whole, you know, heading into the second half of the vote? You know, the Chinese kept saying time and time again was the ratio of, you know, semiconductors to hyperscalers.

[00:01:18]And, you know, do we see a bit further rotation into that?

[00:01:21]If we see a hyperscale, a positive beat, then also what happens with, you know, value into growth UK inflation at a 15 month low right now on the back of the data that came out at 7:07 a.m.. You've got that story.

[00:01:34]You've got the story of a prime Minister who's clearly determined to drive prices lower. And yet the markets are pricing 40 basis points of hikes by the Boe. Does that need to be rethought?

[00:01:42]Yes. I think in terms of, you know, the inflation report we saw this morning, that was the third consecutive downside surprise. There's about 50 basis points below where the Bank of England ultimately expect it to be.

[00:01:52]But obviously since then we've seen the MoU between the U.S.

[00:01:55]and Iran break down. As of what's on the set.

[00:01:57]Energy prices are just continuing to ratchet higher.

[00:02:00]Bodes well, I think. You know, today's data gives you a lower starting point for, you know, when there's energy prices to keep going higher and higher. Bloomberg Economics thinks we probably get about 3% on inflation, which should. The Bank of England is a relatively good news, like 3.5 to 4%. That's kind of their danger zone for where they see inflation. So to me it does look a little bit stretch, particularly given the fact that, you know, even at the peak of the crisis, the Bank of England were pretty reticent to be delivering rate hikes.

[00:02:26]We're early in the earnings season, but so far so good a European earnings good enough expected to be good enough to offset higher prices.

[00:02:34]I mean that definitely appears to be the case for now.

[00:02:36]You know, every time I walk in the office I see energy prices higher and continue to tax overnight. Between U.S., Iran and Euro Sox you know 50 future is just resilient. So you know it's a case of earnings are strong enough. They're expected to remain strong enough in terms of the key sectors. It looks like energy financials and to a lesser extent consumer staples there provide an offset.

[00:02:55]If we see negative tech today then that's also a positive for the European equity complex. Adam Linton from Bloomberg Markets live team Adam thank you. You can get up to date analysis and insight from Adam and the rest of the team.

[00:03:06]Just go to MLive. Go on your terminal.