US tech results, Fed meeting
Josh de la Mare previews some of the big stories in the week ahead, including earnings figures from US tech giants, Facebook, Amazon and Alphabet, the latest meeting of the US Federal Reserve on interest rates, and the continuing crisis in Venezuela.
Studio filmed by Rod Fitzgerald and Petros Gioumpasis. Words by Richard Waters, Mamta Badkar, Andres Schipani and Gideon Long.
Hello. And welcome to The Week Ahead from the Financial Times in London. Here are some of the big stories we're watching this week. Latest figures from tech giants Google, Facebook, and Amazon will show their continued dominance. Eyes are on the US FED and whether it will keep rates unchanged. And the crisis in Venezuela deepens.
The performance of a large slice of the digital economy will be on display this week when just three companies, Amazon, Alphabet, and Facebook release their latest earnings. The three leading internet companies now account for a mind-bending $1.64 trillion dollars of stock market value. That's up $450 billion from a year ago. This has led some to talk of a new tech bubble. But they're rising value could reflect deeper changes in the advertising and e-commerce markets. Richard Waters, FT West Coast editor has more.
So what we've seen is a tremendous market share gain by the leading digital platforms. Amazon now is accounting for something like 50% of the e-commerce growth in the US, and Facebook and Google maybe 80% of the new digital advertising that's coming in. So there's a real sense that these platforms are seeing a return to scale. And I think because of that, you know, the stocks are looking a little vulnerable going into earnings. Growth expectations are very high.
In the advertising world, Facebook and Google are coming off this tremendous boom in mobile advertising. Video, that's set up well for hasn't quite kicked in, in real scale yet. I think the other question is about costs. Capital spending is rising. Huge investments in new data centres, which point to further big growth may be ahead. But right now, I think some uncertainty about what that will do to profit margins.
At 9.2 billion dollars, revenues of Facebook are projected to jump by 43% from a year ago while Amazon is expected to report a 22% increase in revenues to $37.2 billion dollars. The European Commission's announcement last month of a $2.4 billion euro fight against Google is likely to wipe the shine off what would otherwise be a strong set of figures for its parent company, Alphabet.
Staying in the US this week, the Federal Reserve holds its fifth monetary policy setting meeting of the year. Economists widely expect the central bank to leave rates unchanged. But investors will look out for a changing stance of inflation. The FED has previously hinted at three rate rises in 2017 and delivered two already. But expectations of another move before the end of this year have fallen below 50% following disappointing US economics data. Economics writer Martin Sandbu has this analysis.
We've all been watching the Federal Reserve as a central bank that leads the way towards normalisation, getting interest rates back to where they used to be. But recently there were some signs that they might actually take longer than have signalled. First, Janet Yellen, the chair of the Fed sounded more dovish in her latest statements than we would have thought. If you look at the economy, inflation fell a little bit unexpectedly in the US. And, of course, it's low everywhere in the world, stubbornly low. And finally, if you look at what market participants think, look at the market pricing, and it seems that they have reduced their expectations of an imminent rate rise. So we probably are more likely to see no action for the time being.
Meanwhile, in Brazil, falling inflation could see its central bank this week reducing rates and its monetary policy meeting on Wednesday, following its cut in the key interest rate last month. The cuts come amid a growing political crisis, that sign of uncertainty. And still in Latin America, the crisis in Venezuela could come to a head this week. It's more than two months since Venezuelan president, Nicolas Maduro, announced out of the blue elections for a new Constituent Assembly to rewrite the country's constitution.
His decision caused uproar. Anti-government activists stepped up their protests, which recently have included a general strike and a referendum in which 7 million Venezuelans voted against the plan. The US is threatening sanctions while Colombia and Cuba are looking to break the crisis talks. But President Maduro, so far, has not backed down. And so this week we will see whether the plans for the election next Sunday will go ahead or not. The country's opposition has said it would boycott a new assembly and is pushing for early elections and a government of national unity.
Henry Ramos Allup is deputy of the Venezuelan Coalition of Opposition Parties.
And that's what the week ahead looks like from the Financial Times in London. Goodbye.