The Week Ahead: Japanese election to drive yen, FX volatility, plus eyes on US nonfarm payrolls & inflation, AstraZeneca FY results

Equity market volatility rose in recent days as investors reined in some of the most popular momentum trades, pulling back on big tech as fears resurfaced about a bubble in the AI space. Combined Meta, Microsoft, Alphabet and Amazon said they would hike AI capex by around 50% this year to around $650bn. Elsewhere, the FTSE 100 made a record high before pulling back on the wider risk-off moves, we saw continued volatility in precious metals as gold and silver swung around, while crypto markets came under greater pressure with Bitcoin touching $60,000.

Looking ahead, markets will be digesting the outcome of the snap parliamentary elections in Japan over the weekend. A rescheduled US nonfarm payrolls report will be watched extra closely after some signs of weakness in the labour market, while CPI inflation data will be closely monitored. On earnings, the likes of Ford, McDonald’s and Coca-Cola deliver a snapshot of the US consumer, while in AstraZeneca, the largest company on the FTSE, will release full-year results. Sterling will be susceptible to political risk as pressure builds on the prime minister Keir Starmer.

Here’s the key events to watch over the next week.

Monday, 9 February

Japan’s parliamentary elections set the scene for week as markets anticipate a big win for ruling PM Sanae Takaichi. A landslide win for her ruling Liberal Democratic Party in the lower house elections could add to pressure on the yen and JGBs as it’s expected this would free her hand to pursue more reflationary policies and markets fixate on fiscal sustainability. USDJPY could retest the 160 line in the sand and there is a chance of ongoing intervention in JPY if the election stokes the 'Takaichi trade' some more. Traders will be particularly keen to hear about the pledge to suspend the 8% sales tax on food, a proposal that triggered the big selloff in Japanese bonds last month.

Fed Governor Christopher Waller, Atlanta Fed President Raphael Bostic, ECB chief economist Philip Lane and BoE rate-setter Catherine Mann are due to speak at various events.

Tuesday, 10 February

AstraZeneca, the largest company on the FTSE by market capitalisation, reports its full-year results. The key focus will be around revenue growth in high value lines, such as Oncology – its largest and fastest growing therapeutics business; as well as Cardiovascular, Renal & Metabolism (CVRM), and Respiratory & Immunology (R&I). Investors will also be looking at commentary around new drugs rolling out this year with potential $30bn in peak sales in the pipeline and how these get it to $80bn in annual sale by 2030. Markets anticipate revenues rising 8.4% to $58.6 billion, and a 7.7% rise in operating profit to $18.3 billion. Barclays and BP are also due to report Q4 and full-year results.

In the US, retail sales data provides the main economic release alongside the employment cost index, which an important productivity indicator. Earnings come from Coca-Cola, Spotify, Cloudflare, Ford and Gilead. Cleveland Fed President Beth Hammack and Dallas Fed President Lorie Logan are due to speak.

Wednesday, 11 February

Jobs day at last as traders watch the US jobs report for January, delayed from 6 Feb. The unemployment
rate is expected to hold at 4.4%, with nonfarm payrolls rising about 70,000 for the month against December’s 50,000. The report is extra in focus after the previous week’s Challenger job cuts report that spooked equity markets. It showed January layoffs at the highest level since 2009.

On the earnings front, Kraft Heinz, McDonald’s, Shopify, Cisco Systems, QuantumScape and The Trade Desk are among the US large caps set to report, whilst Barratt Redrow takes the limelight in London. In Europe it’s busy on the corporate calendar with Heineken, Michelin, Dassault and TotalEnergies among the major stocks on the slate.

Thursday,12 February

Ashmore, British American Tobacco, Schroders and Unilever report earnings but the highlight arguably will be RELX, which reports full-year resultsafter a deep selloff in the stock as it was seen as particularly vulnerable to Anthropic’s new AI toolkit. One of itsnew AI tools can automate a lot of legal work, which hurt sentiment on RELX as it owns the LexisNexis legal data analytics service.

In the US, cybersecurity stocks Arista Networks and Palo Alto Networks report earnings, alongside Airbnb, Pinterest and Twilio. .Keep an eye on earnings from Applied Materials, which supplies equipment, services and software for the manufacture of semiconductor chips.

UK GDP data will be scored for signs of a pickup in activity as evidenced by the latest round of PMI surveys. US weekly unemployment claims are on deck as well following the surprise jump in claims last week at the same time as job openings slipped to a five-year low.

Friday, 13 February

NatWest reports full-year results and we get an earnings update from Moderna. The focus for the wider market will be the US CPI inflation report, which is seen as a key test of whetherinflation is continuing to cool at a gradual pace.Inflation remained steady at 2.7% in December, while the core inflation rate ticked down to 2.6%. However, there are concerns about the quality of the data as it was affected by the government shutdown that lasted from October until November last year.