The news shaping the markets today

The Ukrainian Air Force shared a Facebook post of Russia’s Kh-101 missile being shot down in the country’s central Vinnytsia region. Oil prices extended downturn on Thursday to finish at their lowest level in more than 3 weeks.

Japan’s bond investments by citizens abroad declined by ¥715.40 billion in the week ending January 28, exerting pressure on the JPY/USD forex pair.

Australia’s building permits surged 18.5% to 16,556 units in December, after a decline of 8.8% in November. Despite this, the AUD/USD pair declined in forex trading this morning.

Germany’s trade surplus grew to €9.7 billion in December, from €6.3 billion in the year-ago period, sending the DAX higher by 2.16% on Thursday.

Spain’s unemployment rate rose by 70,744 to 2.91 million in January, the lowest figure for the month of January since 2008. The IBEX 35 rose 1.45% on Thursday.

What’s happening: Shares of Alphabet edged lower in the extended session on Thursday, after the company released disappointing results for its fourth quarter.

What happened: Investors were unimpressed by the performance of both Google Cloud and YouTube.

The CEO made some important announcements about Google’s conversation technology and search feature.

How were the results: The Mountain View, California-based company reported sales and earnings short of expectations.

• Revenues grew merely 1% year-over-year to $76.05 billion, missing the consensus estimates of $76.53 billion.
• Earnings came in at $1.05 per share, falling short of Wall Street expectations of $1.18 per share.

Why it matters: Alphabet’s digital ad business has recently been under pressure, as companies cut back spending amid concerns around a global economic slowdown. Google’s parent also announced charges related to its planned layoffs.

YouTube advertising revenues declined 8% to $7.96 billion, missing market expectations of $8.25 billion. Facing stiffening competition from TikTok, Alphabet had launched the beta version of YouTube Shorts in September 2020. CEO Sundar Pichai said during the earnings call that YouTube Shorts already has 50 billion daily views.

Google’s Search and Other revenue fell 2% to $42.60 billion. Although Google Cloud revenue grew a healthy 32% to $7.32 billion, it came in short of the consensus estimate of $7.43 billion.

For the layoffs announced last month, Alphabet indicated a charge of $1.9 billion to $2.3 billion, most of which would appear in its books in the first quarter. The company could also incur costs of about $500 million in the quarter, related to a downsizing of its office space. Alphabet warned of other possible real estate charges in future.

Pichai said advanced AI features will “soon” be added to the Google search engine. He announced plans to roll out the company’s latest conversation technology called LaMDA, or Language Model for Dialogue Applications. “Very soon, people will be able to interact directly with our newest, most powerful language model as a companion to Search, in experimental and innovative ways,” Alphabet’s CEO said.

How shares responded: Although Alphabet’s shares fell by 4.6% to $102.78 in extended trading on Thursday, following the release of results, the stock had added 7.28% to close at $107.74. Shares of the company are up almost 21% in the past month.

What to watch: Investors will continue monitoring rising competition from TikTok. Markets will also keep an eye on Alphabet’s new AI-based launches in the search business, which is facing competition from AI-based chatbot ChatGPT, launched by Microsoft-backed OpenAI.

The markets today

The US dollar will be in focus today ahead of the NFP report

Context: The US dollar gained on Wednesday, after the Fed’s interest rate decision.

Details: The US Federal Reserve raised the fed funds rate by 25bps to 4.5%-4.75% at its two-day February meeting, which concluded on Thursday. The latest move by the central bank was widely expected, with policymakers reducing the extent of rate hikes for a second straight meeting. However, this still pushed borrowing costs to their highest level since 2007.

Fed Chairman Jerome Powell said that the disinflation process is in its early stages. While hinting at plans to continue raising the benchmark interest rate till inflation reaches 2%, policymakers added that the monetary policy will take into consideration the impact on US economic activity.

Investors now await the all-important NFP (non-farm payrolls) data. The US economy had added 223,000 jobs in December last year, representing the least job additions since December of 2020 and much lower than the 256,000 rise in November. However, the figure had come in ahead of market expectations of 200,000. The US economy is now widely expected to announce job adds of 185,000 for January.

The US dollar index, which measures the greenback’s performance versus a basket of currencies, rose 0.09% to close at 101.84 on Thursday.

What are expectations: Investors await the release of the unemployment rate and services PMI from the US today. The unemployment rate in the US had eased to 3.5% in December 2022 and is expected to increase to 3.6 in January. The ISM Services PMI had declined to 49.6 in December 2022 and is expected to head back into the expansion zone in January, at 50.4.

Other Markets: US trading indices closed mixed on Thursday, with the S&P 500 and Nasdaq 100 up by 1.47% and 3.25%, respectively, and the Dow Jones index down by 0.11%.

Support & resistances for today

Market snapshot

What else to watch today

Turkey’s inflation rate, France’s industrial production and S&P global services PMI, Spain’s S&P global services PMI, Italy’s S&P global services PMI, Germany’s S&P global services PMI, Eurozone’s S&P global services PMI, Brazil’s industrial production, Mexico’s consumer confidence.

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