BoE meets, Facebook results
The FT's Aimee Keane highlights the key stories to watch for in the coming week, including an interest rate decision from the Bank of England, earnings from Facebook and US economic data.
Produced by Aimee Keane. Filmed by Gregory Bobillot and edited by Ben Marino. Additional writing by Gemma Tetlow, Hannah Kuchler and Mamta Badkar.
Welcome to The Week Ahead. Here are the stories we'll be watching in the next few days. US lawmakers are expected to grow representatives from Facebook, Twitter, and Google as part of the ongoing investigation into Russian interference in the 2016 US election. The Bank of England's monetary policy committee will meet, during which investors anticipate the group will raise interest rates for the first time in more than a decade. And we'll get a check on the health of the US labour market at the end of the week.
Let's start with Silicon Valley heading to Washington. On Wednesday, representatives from Facebook, Twitter, and Google will appear in front of the Senate Intelligence Committee to address Russian interference during the 2016 election through social media, and they'll also address what each of the companies plan to do to mitigate any issues in the 2018 midterm races.
Wednesday will also be a busy day for Facebook as the social networking giant is due to report third quarter results. Here's the FT's Hannah Kuchler with more on what to expect.
So analysts are expected to go a little bit easier on Facebook than congressmen might. So Mark Zuckerberg and Sheryl Sandberg, that's the CEO and COO of Facebook, will be presenting earnings next week. And they're expected to have a good quarter as they have done for the last several quarters.
They're expected to have revenue of $9.8 billion dollars, which is up about 40% from last year, and earnings per share of $1.28, which is up 17% from the same quarter last year. The one thing people would be watching for is any commentary on whether they hit the upper limit of the number of ads that they can share in news feed. If they do that, there may be questions about whether their revenue can continue to grow at the same rate.
Now to the UK, where investors await Bank of England governor Mark Carney's announcement on Thursday after a meeting of the central bank's monetary policy committee. While other central banks are trying to understand stubborn inflation, the Bank of England is dealing with just the opposite. Inflation, which is up 3% in September, is above the bank's 2% target, and forecasters expect the figure to remain at this level until at least 2020. My colleague Gemma Tetlow has more on the meeting from London.
It's widely expected that the Bank of England will announce on Thursday that it's going to increase interest rates from the current historic low level of 0.25% back up to 0.50%, which is where it was until just after the Brexit vote last year. If they did that, it would be the first time in over a decade that the Bank of England has raised interest rates in the UK. The reason expectations are quite so high that this move is going to come this week is that [INAUDIBLE] the monetary policy committee gave a pretty hawkish stare at that last meeting that, unless things turned out much worse than they had expected, they were minded to raise rates in the coming months.
Growth in the UK economy has slowed this year compared to historic standards, but it is close to what the bank now judges to be the UK sustainable growth rate. Unemployment is low at 4.3%, which also suggests there's limited spare capacity in the labour market, and both of these factors could give hawks on the committee the ammunition to argue there's little justification for monetary policy to remain quite so accommodative.
And on Friday, we'll get a check of the health of the US economy starting with the US jobs report, which tracks activity in the labour market. Mamta Badkar reports from New York on what to expect from this release.
In September, the US economy shed jobs for the first time since 2010 as the labour market was impacted by hurricanes Harvey and Irma. This time around, economists are expecting a rebound in US hiring, with the economy expected to create about 300,000 jobs in October. They will, of course, also be watching for revisions to the previous month's data. The US labour market doesn't always, however, recover that quickly. Going back to Hurricane Katrina in 2005, it took about three months for the labour market to fully recover.
The other things that investors are probably going to pay attention to is average hourly earnings. That's because the Federal Reserve is looking for signs that inflation is approaching its 2% objective. In September, average hourly earnings rose 2.9% from a year ago. That was the quickest pace since 2009. And this time around, investors want to see if that momentum is likely to continue or reverse.
Data on manufacturing and other business activity are also due to be released on Friday. The ISM manufacturing index is expected to slip to 59 in October, down from 60.8 in September, according to a Thomson Reuters survey of economists. However, any reading above 50 does indicate that manufacturing continues to expand. And despite the devastation wrought by hurricanes Harvey and Irma in the south, momentum in the manufacturing sector looks to be steady. The durable goods report from September pointed to optimism in the sector.
Investors will also be watching for non-manufacturing PMI report, which looks at the health services sector, including professional services, health care, and other non-manufacturing industries, which account for the lion's share of the US economy. The index is expected to have slid slightly to 59 from a reading of 59.8 in September. And that's what the week ahead looks like from the FT in New York.