Netflix dived more than 25% in the afterhours trading after announcing that the subscriptions fell by 200’000 in the Q1.
The carnage in Netflix’s share price will certainly plummet the good mood in Nasdaq, which rallied more than 2% yesterday. Nasdaq futures are pointing to the downside at the time of writing.
The European markets traded in the red on the back of the escalation in Ukraine, as Russia launched the ‘second phase’ of the war in the Eastern Ukraine. The futures point at a positive start, yet the risks remain tilted to the downside.
Yesterday
Major US indices traded in the green on Tuesday, despite discouraging news.
First, the World Bank cut the global growth forecast by nearly a percentage point, from 4.1% to 3.2%, which includes a 4.1% economic contraction in Europe and Central Asia mainly due to the Ukrainian war. And IMF followed the world bank in cutting its growth forecast from 4.4% to 3.6% in 2022. It also projected an even faster inflation of 5.7% in advanced economies and 8.7% in emerging and developing countries.
Crude oil fell 4.5% to $102 per barrel, but is already trading up this morning as the price pullbacks in crude oil are still seen as interesting dip-buying opportunities as the supply side remains problematic with the war, the OPEC’s unwillingness to pump more oil, the unrest in Libya and Houthi attacks in Saudi Arabia. Therefore, the slowdown in demand side is certainly slowing the positive trend, but it doesn’t necessarily weigh enough to reverse the positive trend.
Then, the Chinese data showed that the imports fell, the industrial production slowed sharply in March due to new Covid lockdowns, the unemployment advanced to 5.8% which is above the government’s target of 5.5% and the retail sales tumbled near 2% during the month and 3.5% since last March, which is the worst annual drop since 2020. The Chinese government is stubborn in keeping the zero Covid policy in place and the places that are actually locked down stand for about 25% of the GDP according to JP Morgan.
Finally, St Louis Fed President James Bullard said he wouldn’t rule out a 75-bp increase in the US rates, though this is not his ‘base case’ for May meeting. He said that the fed funds rate should be lifted to minimum to 3.5% by the end of the year. Funny enough, the market didn’t react to his words. Bullard’s comments went mostly unpriced.
But the US 2-year yield continued to push higher, as the US 10-year yield is now preparing to test the 3% mark for the first time since the end of 2018. Gold couldn’t consolidate gains near the $2000 mark and the failure to move above this psychological level sent the price of an ounce down to the $1945 this morning. The geopolitical tensions should keep the downside limited, but the rising US yields drives a part of safe haven demand towards alternatives, and the dollar amasses a part of the geopolitical inflows.
The US dollar continues gaining against the major counterparts. The US dollar index is now comfortably consolidating above the 100 mark, and the gains against the Japanese yen are unstoppable as the USDJPY fell to the lowest level in almost twenty years and the pair is now preparing to test the 130 mark on growing divergence between an increasingly hawkish Fed, and a still-dovish BoJ, given that the Japanese don’t fight the same inflation battle than the rest of the world. But the Japanese officials are feeling tense about the rapid fall in the yen, as a rapid depreciation could harm the economy. The rapid yen depreciation calls for a concrete action from the Bank of Japan, as the verbal intervention from the officials haven’t been sufficient to stop the bleeding in the yen.
