Market Report: Cloud competition probe, US braces for jobs data
FTSE 100 opens in the green ahead of US jobs data
Amazon and Microsoft face cloud competition probe
World Trade Organisation halves predictions for global growth, global housebuilding at lowest level since 2009
Oil price on track for weekly drop
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown: “The FTSE 100 has a spring in its step as we end the week, buoyed by optimsism that important jobs data from the US will support the current interest rate playbook. Fewer jobs are expecting to have been added to the market in what is a crucial dataset for the Federal Reserve’s next interest rate decision. Since global policymakers are increasingly adopting a wait-and-see approach, it’s now time for the economy to prove things are moving in the right – cooler – direction. With this in mind, early indiciators suggest the US markets are biding their time, with futures relatively flat.
US giants Amazon and Microsoft are facing a probe from the UK’s competition authority. The competition enquiry centres around the enormous market dominance of Microsoft and Amazon in the cloud computing space, making it harder for customers to switch and muddying the fair-pricing picture. While this is an unwelcome development, it doesn’t yet derail the business case for these tech giants. Investors don’t appear to be too worried. A large reason for this is that Amazon and Microsoft’s huge scale means that regulatory scrutiny is an ongoing and well-established risk. That said, investors have flinched more regarding Amazon than Microsoft, largely because Amazon Web Services counts for the vast majority of Amazon’s profits these days. Tweaks to Cloud practices and even potentially trimming some services are all possibilities and have been since these giants starting growing exponentially. The huge amount of investment needed to get cloud services off the ground means there can’t ever be a huge pool of available companies offering these services, there simply aren’t many businesses with deep enough pockets. The competition authority will be aware of this, so at this stage it doesn’t seem we’re looking at an up-ending of the sector, but incremental changes and compromise are possible outcomes.
Economic indicators are creaking, including the World Trade Organisation’s decision to cut global growth forecasts in half to 0.8%. Persistently high inflation and interest rates have muddied the consumer landscape in the US, Europe and Asia. Spending power has been seriously tampered with across the world, and there isn’t currently a coherent playbook for how central banks will react. Policymakers are in reactionary mode, and there’s a lack of proactive strategy.
Sluggish demand and rising borrowing costs have contributed to a huge slowdown in housebuilding. Building is now at its slowest pace since 2009, excluding the pandemic, the S&P Global and CIPS purchasing managers’ index (PMI) showed. Projects are being tabled amid a serious decline in activity as prospective buyers wait out the storm which is hammering their personal finances. The UK market houses some building giants, and many have talked of slowing completion rates. The UK still has a large housing deficit and is structurally geared up to support home ownership, but these are long-term trends and the short-term looks to be potentially challenging.
The oil price is set for a weekly drop, with prices of Brent crude at around $84 a barrel. That reflects a drop of over 8% over the week. While supply remains tight and is very much an ongoing concern, there’s increasing concern about the global demand picture. The world’s economic dashboard has a few extra orange lights on it, and that’s showing up in the oil price.”
