💪 Microsoft and Alphabet triumphed

What’s going on here?

Microsoft and Alphabet both announced expectation-beating quarterly revenue on Tuesday, even though the firms’ cloud divisions broke away from each other.

What does this mean?

Microsoft flew past Wall Street’s projections when it reported results late on Tuesday, announcing that revenue came in just above $56 billion last quarter, 13% higher than the same time last year. That was mainly down to strong showings in the tech titan’s Azure cloud computing division and office software businesses. Alphabet will be envious of that, mind you. The cloud sector over at Google’s parent company fell short of estimates, mustering up a roughly 22% uptick over the quarter versus 28% the one before.

Why should I care?

For markets: Big Tech, bigger expectations.

Investors expect a lot from Big Tech, which means major companies are measured against lofty targets. Microsoft’s banking on artificial intelligence (AI) to smarten up business in the long term, which explains why the firm’s poured cash into ChatGPT’s creator OpenAI and got to work on its own chatbot. Looks like that’s already paying off: those AI-assisted quarterly results will have comforted investors’ worries that the cloud business – Microsoft’s biggest moneymaker – might be running out of steam, and given them more reason to trust the tech firm’s master plan.

The bigger picture: It’s nice for some.

Alphabet may have had issues with its cloud business, but the company can comfort itself with promising digital advertising results. That’ll bode well for rivals like Meta, Amazon, and Pinterest too, suggesting that companies are still willing and able to splash out on ads on social media sites. So far, so good for Big Tech, then: while plenty of businesses have been all but wiped out by market conditions and high interest rates, major tech companies have managed to hold relatively steady. And sure, they may come under fire if their AI endeavors still aren’t bearing fruit next year, but if you believe that stock-squashing interest rates have topped out, then there’s no reason to doubt Big Tech’s power going forward.

What’s going on here?

Activity in Europe’s private sector dozed off in October, and that laissez-faire attitude might put the economy into a deep sleep.

What does this mean?

Whether businesses are busy or not can tell you a lot about the economy. That’s why analysts keep a keen eye on the purchasing managers' index (PMI), which turns survey answers from business managers into hard numbers. And according to the latest results, Europe’s economy is going from bad to worse: the PMI dropped to a three-year low of 46.5 in October, well below the 50-mark that indicates shrinkage and defying expectations for a slight increase from September. Combine that sluggish start to this quarter with economists’ assertions that the economy shrank last quarter, and the region’s most likely headed for a recession – that is, two consecutive quarters of negative growth.

Why should I care?

For markets: No commitment issues in sight.

After hiking economy-bruising interest rates at the last ten consecutive meetings, the European Central Bank may use that PMI data to justify a pause when it meets on Thursday. But don’t take that as the beginning of the end: with European inflation more than double its target and energy prices on the rise due to renewed conflict in the Middle East, the central bank’s expected to keep rates where they are, or slightly higher, for a while to come.

The bigger picture: The breadwinner’s back.

Germany is usually the provider of Europe, even though the country's needed a helping hand lately. This week, though, the International Monetary Fund said that Germany is set to overtake Japan as the world’s third-biggest economy, spurred on by the Japanese yen sliding against both the dollar and euro. According to those projections, Germany’s economy should hit $4.4 trillion this year, coming in around $200 billion meatier than Japan’s.