Spotify IPO


The unconventional initial public offering (IPO) of Swedish streaming service Spotify (SPOT) on April 3rd is the headline event this week. Unlike traditional market debuts, the company is using a direct listing that sidesteps the usual investor roadshows and team of investment bankers underwriting the offering.

It is expected to be the biggest launch since the Snap IPO last year and comes at a time when the number of tech IPOs as a proportion of total US listings is at a two-decade low.  Many hope that a successful IPO could encourage other unicorns like Airbnb and Uber to list publicly, having so far gone down the private funding route.

Ahead of the IPO, management delivered a bullish assessment of future growth. Guidance revealed last week shows they expect sales to rise to between €4.9bn and €5.3bn this year, up 20-30% year-over-year. Although this is a slowdown from the 38% growth in 2017, Spotify expects losses to shrink and gross margins to improve. Margins of 23-25% are expected in 2018, up from 14% in 2016. Operating losses of €230m-€330m is forecast for 2018, down from €378m last year.

The question is can Spotify convince investors that it’s able to turn a profit? The guidance suggests a company growing fast but facing inherent, structural problems in its model that have stopped it from making a profit.

Spotify shares will launch on the NYSE on April 3rd with the ticker SPOT. With no underwriting or banks acting as a ‘stabilisation agent’ when the stock debuts, it is expected that the share price could be very volatile. A valuation of around $23bn has been estimated from private dealings but it is hard to assess precisely where this will trade without an IPO strike price to go on. More on the Spotify IPO.


Nonfarm payrolls


The monthly labour market report from the US is the main piece of macro data. Last month’s release blew past expectations, with 313,000 jobs created in February. The unemployment rate remained at 4.1%, the lowest since December 2000. Meanwhile average earnings growth cooled from the 2.9% print for January that caused the upset in financial markets. Taken together, the report was seen as a ‘Goldilocks’ reading for US growth and asset prices.

With the US at or even beyond full employment, the focus again this week is on the average earnings data for clues about inflation and what impact this could have on the Federal Reserve’s rate hike timetable, which currently suggests two more 25-basis-point increases this year.

Services PMI


UK data aplenty this week with the focus on the services purchasing managers’ index (PMI) on Wednesday. By far the largest contributor to GDP, the services sector report is usually the most important of the PMI releases (manufacturing and construction reports are also due). Last month’s report showed a surprising uplift in activity, with the IHS Markit/CIPS survey showing the strongest rate of service sector growth in four months in February.

Eurozone inflation


Flash CPI inflation readings are the main data points for EUR traders as markets decide how close the European Central Bank is to dialling back its stimulus programme. The worry for the ECB is that rather than seeing inflation pick up as planned, price pressures are showing signs of easing as the effect of the recovery in oil starts to fade.

Inflation in February fell to 1.1% from 1.3% in January – significantly below the 2% recorded 12 months prior. More shaky inflation data could start to worry euro bulls if it makes the ECB more cautious on its exit from extraordinary monetary policy measures.

Economic Calendar

(All times GMT)

Monday, 2 April

Easter trading hours – Bank holiday in UK, Europe (check emails for full details of changes to market hours)

02:45 – China Caixin manufacturing PMI

09:00 – Eurozone final manufacturing PMI

09:30 – UK manufacturing PMI

15:00 – US ISM manufacturing PMI

23:00 – New Zealand NZIER business confidence

Tuesday, 3 April

05:30 – RBA cash rate, rate statement

07:00 – German retail sales

09:30 – UK construction PMI

Wednesday, 4 April

00:01 – UK BRC shop price index

02:30 – Australia retail sales, building approvals

02:45 – China Caixin services PMI

08:00 – Spanish unemployment change

09:30 – UK services PMI

10:00 – Eurozone CPI inflation flash estimate

15:00 – US ISM non-manufacturing PMI

15:30 – US crude oil inventories

Thursday, 5 April

02:30 – Australia trade balance

07:00 – German factory orders

12:30 – ECB monetary policy meeting accounts

13:15 – US ADP nonfarm employment change

13:30 – US weekly unemployment claims

13:30 – Canada trade balance

Friday, 6 April

00:01 – UK RICS house price balance

07:00 – German industrial production

13:30 – Canada employment change

13:30 – US nonfarm payrolls, average earnings, unemployment rate

15:00 – Canada Ivey PMI

Corporate Calendar


Tuesday, 3 April

Spotify (SPOT) - IPO

Wednesday, 4 April

Topps Tiles (TPT) – trading update

Thursday, 5 April

Electrocomponents plc (ECM) – trading update


Sources: Bloomberg/Companies

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