FTSE lower despite brent surging Alphabet in focus

After gapping lower on the open the FTSE spent the day clawing back losses, moving towards the flat line before dipping lower again towards the close. Whilst house-builders dominated the lower reaches of the FTSE, energy stocks bounded higher tracing the price of oil northwards amid rising geopolitical tensions.

Brent surged over 1% across Monday’s session in response to President Trump’s threatening tweet to Iranian president Hassan Rouhani, bringing geopolitical concerns back under the spotlight. The ramping up of hot headed rhetoric between the two leaders, with Trump threatening to halt Iranian oil exports, potentially crippling the economy and Rouhani threatening the “mother of all wars”, has amplified supply concerns. With the price of oil elevated, oil majors such as Shell and BP were also trading higher.

Weakness in tech stocks overshadowed strength in the energy sector over on Wall Street, as earning season moves into full throttle. On the S&P 170 firms are due to report this week whilst 11 companies on the Dow are also set to update the market this week, potentially providing enough of a distraction to tear investors away from trade war headlines. The biggest focus will be on FAANG stocks with the Google parent Alphabet up first after the closing bell.

Alphabet: What to expect
Investors are expecting some big numbers from Alphabet is expected to report earnings of $9.59 per share against revenue of $32.19 billion just days after the EU slapped a $5 billion fine on the firm. The fact that the share price barely acknowledged the fine, shows the extent of bullish sentiment toward the stock. 
Alphabet has gained 25% across the past year, successfully navigating through periods of high volatility for the broader market. The stock even pushed on to an all-time high of $1204 just last week, whilst the S&P was fretting about trade wars. 

In today’s results investors will be keeping a close eye on costs, which surged across the Q1 as the firm plays catch up on cloud computing and consumer device businesses. Whilst the increased spending is a positive over the long term, it is putting pressure on margins, unnerving short-term investors. Whilst earnings and revenue continue to impress across quarters, pressurised margins and rising costs have resulted in a negative reaction in previous earning reports.

Still, the stock is rallying 0.7% ahead of the release, suggesting that even if costs are on the up, investors remain relaxed that the traditional growth drivers remain unchallenged. Whether that continues to be case following the results remains to be seen.