Week ahead: Fed and ECB to meet, as Apple, Amazon and Alphabet set to report

1) FOMC rate meeting – 29/10 – even with the absence of critical labour market and prices data there appears to be a consensus for another 25bps rate cut from the US central bank when it meets later in the week. There is plenty of evidence that the jobs market is undergoing a modest slowdown, although there is some concern over the impact that continued threats to increase tariffs are having when it comes to companies looking to maintain their competitiveness by raising prices. While the government shutdown is impacting the release schedules, as well as the data collection capability of the BLS, there are plenty of other avenues we can use to gauge the strength or otherwise of the US economy. Growth for Q3 is already estimated to be trending at just below 4% annualised, while the recent US CPI report showed that price pressures continued to be sticky, with core CPI at 3.1%, while headline CPI rose to 2.9% in September from 2.7% in August. This alone is likely to keep Fed officials cautious especially since they have access to the latest ADP, as well as ISM reports. Fed governor Christoper Waller, who had until recently been conspicuous by his silence on monetary policy in the days and weeks after the most recent Fed decision finally weighed in saying that any job weakness can be dealt with by gradual rate cuts, even without the latest BLS data. He was also at pains to rule out aggressive moves on rates given that the economy appeared to be growing strongly. New Fed appointee Stephen Miran remains an outlier on the FOMC, given recent comments from other Fed officials thus showing that he is merely President Trump’s stooge.

2) ECB rate meeting - 30/10 – no changes are expected here even as inflation in the EU is showing signs of ticking higher, after September CPI edged up to 2.2% from 2.1% in August. Core inflation also ticked higher, rising to 2.4% and the highest since April. In the last few months headline inflation in Europe has risen from lows of 1.9% in May with the ECB likely to keep rates steady as the last few rate cuts continue to trickle down into the system. The rise of the euro is also helping to keep a lid on the recent rebound in prices, with the euro already up by over 10% year to date against the US dollar. We’ve heard from a number of ECB officials ruling out the prospect of further cuts with the likes of Belgium’s Pierre Wunsch, as well as Malta’s Edward Scicluna expressing caution at the prospect. These two aren’t alone either with the Bundesbank’s Nagel, Austria’s Kocher and France’s Villeroy de Galhau all expressing similar sentiments, with concerns about tariff effects very much front of mind.     

3) UK Mortgage Approvals/Lending data (Sep) – 29/10 – UK mortgage approvals have proved to be remarkably resilient this year despite concerns about the strength of the UK economy. Modest declines in mortgage rates have certainly helped, pushing approvals up over the first 6 months of this year, although we did see a modest slowdown in August to 64.68k, which is probably due to the summer holidays. The housing market does appear to be slowing with the gap between asking and selling prices still quite wide. Will we see further upticks before the latest budget in November, on concerns over tax changes that might be brought in with respect to the housing market.

4) HSBC Q3 25 – 28/10 – there was broad based disappointment when HSBC reported its Q2 numbers due to a 10% rise in costs which impacted the banks’ profits along with a $2.1bn impairment charge on its stake in Bank of Communications Hong Kong. This caused the shares to fall sharply, even though they subsequently recovered to fresh record highs earlier this month, before slipping back again after the bank suspended its buyback program to purchase the remaining stake of Hang Seng bank that it doesn’t already own. Pre-tax profits came in at $6.3bn, a 29% decline and well below estimates of $7bn. Credit losses also came in higher at $1.1bn due to downward pressure on values in Hong Kong real estate, a problem that could well see further crystallisation with the recent decision to purchase the remaining stake of Hang Seng. Over the half year profits after tax were 30% lower compared to H1 2024 coming in at $12.44bn. Net interest margin was also lower in contrast to its peers, slipping to 1.57%. While the bank announced a further $3bn share buyback, and a 10c a share interim dividend, guidance was uninspiring, remaining unchanged, but with the bank saying it expects ECL charges as a percentage of average gross loans to be around 40bps in 2025 due to weakness in the HK real estate sector. This slowdown in profits wasn’t confined to Hong Kong, with profits in the UK also lower by $250m in H1. While we now know that further share buybacks will be suspended to fund the Hang Seng acquisition attention is likely to be squarely focussed on further ECL charges given recent events, and whether any how much higher any further provisions will be in the short, as well as long term.

5) Next Q3 25 – 29/10 – we’ve seen another decent quarter for Next shareholders with the share price posting a new record high this month, despite concerns over a continued squeeze on consumer incomes. When Next reported back at the end of July there was some scepticism that the retailer would be able to carry on its recent trend of raising its guidance that has been the hallmark of a lot of its recent trading numbers. In Q2 full price sales remained solid, rising by 10.5%, and £49m ahead of its guidance for that period, although they may well have benefitted from the hacking problems over at M&S. As a result, Next increased their guidance for full price sales for H2 from 3.5% to 4.5%, adding an extra £27m to the forecast. Consequently, Next said it would be raising its full year guidance for profit before tax by £25m to £1.1bn. Online appears to have driven most of the improvement with an increase of 9.5%, while retail stores added 5.6%. International online also appears to be seeing solid growth and it is here that appears to be driving the broader improvement. On their UK numbers Next was more cautious, saying that UK guidance for sales for H2 is only 1.9%, vs 7.6% in H1, and that consumer spending is expected to slow materially in H2. On the other hand, guidance for International was increased from 13.1% to 19.4%.  

6) Shell Q3 25 – 30/10 – it’s been an uneventful quarter for Shell share price wise since it reported its Q2 numbers at the end of July. Profits were expected to be lower due to underperformance in its integrated gas business, but they still managed to come in above expectations, at $4.26bn, down from $6.3bn last year. At the time Shell said it would be maintaining its $3.5bn share buyback program while maintaining its annual capex commitments of between $20bn to $22bn. All of Shell’s divisions saw sharp declines in adjusted earnings, integrated gas slumping to $1.7bn, while its chemicals division saw profits fall to $118m, down from over $1bn a year ago. Part of that capex spend is going into new offshore gas projects in Nigeria to supply gas to global LNG, as well as domestic markets and will cost a further $7bn. The company also announced that its biofuels plant in Rotterdam will not be restarted as it pares back further its commitment to net zero, which is expected to cost it $600m. Shell also said it would be selling its home energy businesses in the UK and Germany to Octopus Energy. Expectations for Q3 are expected to be higher after Shell said that it expects a “significantly higher” trading performance in its gas business for Q3, raising its production outlook for LNG to a range of 7m to 7.4m metric tonnes. Shell also expects to report a refining margin of $11.60 per barrel in its upstream oil production business.     

7) Microsoft Q1 26 – 29/10 – having led the way this year when it comes to share price performance of the Mag 7, Microsoft shares have continued their way with another decent set of numbers, pushing the value of the business into the $4trn bracket with Nvidia. Even with guidance set well above Q3 levels the numbers still managed to beat expectations. Q4 revenues were $76.4bn well above the $74.15bn forecast, an increase of 18% while net income also soared to $27.2bn an increase of 24%. Once again it was investment in cloud and AI that drove the improvement with a 27% rise in server product and cloud services revenue. Across the business there were solid revenue gains with Azure and other cloud services seeing a 39% increase in revenue over the quarter, while Windows and OEM devices was the weakest with a 3% increase year on year The Intelligent Cloud segment which includes Azure saw Q4 revenue of $29.8bn, with the continued investment into AI services continuing to pay off. Over the fiscal year Azure revenue came in at $75bn, an increase of 34% annually. Total revenue for the year was $281.7bn, with net income surging into 3 figures of $101.8bn, up from $88.14bn in 2024. On guidance Microsoft says it expects revenue of between $74.7-$75.8bn. Azure is expected to see a 37% increase in revenue. The company said it would be spending $30bn in the current quarter as it looks to build out its ability to power its AI services. If that pace is maintained that would equate to $120bn annually an absolutely eye-watering sum.

8) Apple Q4 25 – 30/10 – when Apple reported at the end of its Q3 it had been one of the worst performers year to date of the Magnificent 7 companies so the bar was quite low when it came to its latest results. Nonetheless the Q3 numbers were still impressive with $94bn in revenue, a record for the quarter, and a 10% increase on 2024. Services revenue was also strong, coming in at $27.4bn, also a record. Net income came in at $23.4bn or $1.57c a share. Unlike Q2 which showed that sales in China slowed, sales actually increased in Q3, rising to $15.37bn, an increase of 4.4%, with iPhone sales seeing a big jump from last year, rising to $44.58bn. What might explain this surge was handset purchases being brought forward to avoid possible tariffs which would increase prices for these pieces of hardware.

We also saw stronger demand in Europe, as well as the Americas for Apple products, although it was noticeable that this demand appears to have been confined to iPhone and Mac sales. iPad sales and sales of wearables generated lower revenues compared to a year ago. iPad revenues slowed to $6.58bn from $7.16bn a year ago, while wearables slowed to $7.4bn from $8.1bn. Q4 guidance was underwhelming, although services revenue is still expected to grow significantly. Gross margin of 46% to 47% including $1.1bn impact of tariffs. Operating expenses projected to be between $15.6bn and $15.8bn. We have seen a rise in the share price over the last few weeks to new record highs, in the wake of the recent Apple event in September which saw the company announce a raft of upgrades to its handsets, as well as its software architecture. These new phones appear to have prompted a bit of an upgrade frenzy after it was reported that there were extended wait times for its latest iPhone 17 devices, with forecasts of 4% smartphone revenue growth for the latest fiscal year. There was also optimism that the commitment to invest an extra $100bn in the US over the next 4 years would pay off as it looks to avoid the impact of tariff penalties, as well as investing in its AI architecture.  

9) Meta Platforms Q3 25 – 29/10 - Meta Platforms shares surged to new record highs in the aftermath of their Q2 numbers after beating on revenue of $47.5bn, an increase of 22%, on last year, and also in excess of forecasts of $45.5bn. This outperformance helped push net income higher by 36% to $18.34bn. The Family of Apps business contributed $47.15bn in revenue, with Reality Labs adding the rest, as well as a $4.5bn loss, which dragged down overall profitability. For Q3 Meta says it expects revenue of between $47.5bn and $50.5bn, while total capex for 2025 has been revised up slightly on the lower boundary from $64-72bn to $66-72bn.    

10) Amazon Q3 25 – 30/10 – Amazon shares fell sharply after their Q2 results, despite the company posting a strong set of Q2 earnings numbers. Net sales came in well ahead of forecasts at $167.7bn, an increase of 13%, compared to $148bn a year ago, and above the upper forecast of $164bn, helped by a strong Prime Day showing. Amazon Web Services also performed well, revenues rising 17.5% to $30.9bn, however it would appear that pressure is starting to be brought to bear on margins, and it is here that some caution might be creeping in. Nonetheless profits were still strong with net income rising to $18.2bn or $1.68 a share. On a geographical basis the results were solid across the board with NA sales and international sales both coming in ahead of forecasts, while operating margins also held up well, improving year on year, rising to 11.4% from 9.9% a year ago. The post results weakness appears to be as a result of the guidance for Q3 which seems to have disappointed some more bullish expectations. Q3 net sales forecast is for $174bn to $179.5bn, however the operating income figure was a little light at between $15bn and $20.5bn. The bad publicity around the recent outage of AWS is also likely to be a concern going forward especially when it comes to the resilience of the Amazon network. It could give some businesses pause and possibly prompt a move elsewhere.

11) Alphabet Q3 25 – 29/10 – continues to go from strength to strength after another solid set of numbers from when the Google owner reported in Q2. Revenues were up by 14% to $96.43bn, while net income rose to $28.19bn or $2.31 a share, beating expectations on both measures. The company raised its guidance for AI capex to $85bn, an increase of $10bn helped by key improvements in revenue across all of its key business areas. Google search revenue rose to $54.19bn, while YouTube rose to $9.8bn. Cloud revenue saw a big improvement, rising over 30% to $13.62bn. Will its cloud business benefit from the recent problems at AWS? The company was positive when it came to Q3 guidance saying that FX could provide a tailwind on the revenue front. There has been some concern in recent months about how all of this enormous capex spend will generate further returns. With eye-watering sums already being committed will we see further increases being announced. There is also an expectation that Q3 revenues might break the $100bn revenue mark, paying particular attention to any signs of a slowing economy in its advertising business.