This week
Assigned as a training exercise to a member of staff by Atari back in 1972, the management of the then arcade game manufacturer were so impressed by the concept of a new electronic ping pong game, they decided to publish it under the title “Pong”.
Widely considered as one of the first home video games ever, the industry has come a long way since the days of a dot bouncing between two lines. With a market size currently valued at $221 billion, computer games are big business nowadays, almost too big it would seem. This week saw the UK’s Competition and Markets Authority (CMA) attempt to press pause on the $69 billion acquisition of “Call of Duty” maker, Activision Blizzard, by Xbox owner, Microsoft, sparking debate about the future of the industry. According to the CMA, the biggest ever deal in gaming, announced a year ago, could result in higher prices, fewer choices, and less innovation for millions of players, as well as stifling competition in cloud gaming. In December, the United States also moved to block the deal, citing Microsoft's record of hoarding valuable gaming content, throwing the deal into doubt.
After a bumper US jobs report last week, showing far more Americans had joined the employment market than anticipated and stoking fears the Federal Reserve will have to keep hiking rates to slow inflation, it was Fed Chair, Jay Powell, that needed consoling. Reprising the message he tried to exude last week, Powell struck a more hawkish tone on Wednesday, commenting that perhaps raising rates to the next level would be prudent during their next few meetings and that there was no need for a ‘Switch’.
This sentiment was further backed up by New York Fed Governor, John Williams, who commented at a Wall Street Journal event the following day "5-5.25% seems a very reasonable view of what we'll need to do this year in order to get the supply and demand imbalances down."
On a company level, the undoubted winner of the week was BP, announcing that its profits nearly doubled to £23 billion for 2022. With energy prices soaring after Russia’s invasion of Ukraine, BP has not been the first oil major to report record gains, with other FTSE heavyweight, Shell, reporting record earnings of nearly £33bn last week.
With BP jumping around 4% on the day, it was unsurprising that the FTSE 100 also beat its own personal high score this week. Hovering near its record level for around a ‘Fortnite’ previously, the index has now broken its record intraday high on the 3rd, 8th, and 9th February. Being heavily exposed to commodity companies has helped the index avoid the drawdowns some other mainstream indices have endured, especially since China ended its Zero-Covid policy, increasing its demand for metals and oil.
The recent resurgence of the much-maligned FTSE 100 over its more fashionable counterparts, such as the tech heavy NASDAQ, over the past few months shows there is still resilience in what has been a challenged market over the past decade or so, and despite not any listed computer game manufacturers, it seems it’s far from game over for domestic blue chips.
Next week
With all the ways that Valentine’s Day could be described, perhaps it is in Southeast Asia we should look for the true meaning. It is telling that on the Wikipedia entry for Valentine’s Day for the Philippines, it merely says the day is usually marked by a steep increase in the price of flowers, particularly red roses. With the usual last-minute dash to a card shop and florists on Tuesday, many will be looking towards the Office for National Statistic’s Average Earnings Index, released the same day, for solace.
Detailing the change in the price businesses and the government pay their employees, including bonuses, the data is crucial for understanding the future trajectory of inflation, as the more consumers earn, the more they tend to spend. The numbers should make for particularly interesting reading as the Bank of England begins to wind down its rate hikes, commenting that their decisions will be much more data dependant going forward.
The big day will also include US inflation figures, represented by Consumer Price Index readings, released by the US Bureau of Labour Statistics. With the US labour market proving remarkably resilient in the face of the Federal Reserve’s rate tightening policy, it will be interesting to see if last week’s bumper number of those joining the work force will be something to fall in love with when considering how it should affect inflation.
Staying in the US and wrapping up the week, the market’s focus be on retail sales. Fortunately, the predicted rise in rose and chocolates sales shouldn’t skew the data too much but the links between consumer confidence, spending and inflation are well proven, making this data point key to understanding how the Fed may react going forward.
The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used, you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 10 February 2023.