Netflix, Nord Stream, Earnings and Crude Inventories - What's Moving Markets

Netflix, Nord Stream, Earnings and Crude Inventories - What's Moving Markets — Netflix (NASDAQ:NFLX) disappoints with its subscriber growth forecasts, the U.S. relents in its efforts to stop a new Russian gas pipeline to Germany, the U.K. threatens to rip up its Brexit deal with the EU, and oil prices shake off a first build in two months for U.S. inventories. Earnings continue to flood in, with J&J, Texas Instruments (NASDAQ:TXN) and Coke leading the line-up. Here’s what you need to know in financial markets on Wednesday, 21st July.

1. Netflix forecast disappoints

Netflix reported better-than-expected earnings for the second quarter but lost subscribers in its home market and disappointed some with a cautious approach to tapping new potential revenue streams such as video games.

The streaming giant, which hired Facebook (NASDAQ:FB) executive Mike Verdu to head a new videogaming business, said it doesn’t see gaming as a core product in the near term, but will make games available on mobile devices to test consumer appetite for them.  

The company lost a net 430,000 subscribers in the North American market in the quarter, a development that analysts put down to economic reopening, viewer fatigue and, to a degree, growing competition. Worldwide, it added 1.5 million subscribers, more than expected.  Its forecast of 3.5 million net subscriber adds in the current quarter was also well below market estimates of nearly 5 million.

2. U.S. set to drop Nord Stream opposition

The U.S. is set to drop its opposition to a new undersea gas pipeline from Russia to Germany, in what amounts to a conciliatory gesture to the countries at both ends of the pipe.

The Wall Street Journal reported that Germany had agreed in return to take unilateral action against Russia if it should ever use gas supplies as an economic weapon. That’s a nod to Poland, the Baltic States and, especially, Ukraine. Ukraine has suffered supply interruptions in the past after missing payments and siphoning gas destined for Gazprom (MCX:GAZP) customers in the EU.

Gazprom stock was up 0.3% in Moscow. It has nearly doubled since November as the prospects for completing the Nord Stream 2 pipeline have improved, and as European gas prices have spiked to record levels.

3. Stocks set to extend recovery; J&J, Coke, Texas Instruments earnings due

U.S. stock markets are set to extend Tuesday’s recovery when they open later, after some aggressive ‘buying the dip’ strategies revived the market’s short-term momentum despite concern at the spread of Covid-19.

By 6:15 AM ET (1015 GMT), Dow Jones futures were up 173 points, or 0.5%, while S&P 500 futures were up 0.4% and Nasdaq futures were essentially flat, as Netflix’s figures reminded people of the limits of pandemic-driven growth.  

Earnings season continues in full swing, with early updates from Johnson & Johnson (NYSE:JNJ), Coca-Cola (NYSE:KO), Verizon (NYSE:VZ), Harley-Davidson (NYSE:HOG), Texas Instruments and Anthem (NYSE:ANTM), and reports after the bell from Crown Castle (NYSE:CCI), Equifax (NYSE:EFX), Whirlpool (NYSE:WHR) and CSX (NASDAQ:CSX).

In Europe, SAP (DE:SAPG) raised its revenue growth forecast for the second time this year, while ASML  (NASDAQ:ASML), which makes printing machines for silicon chips, also raised its sales growth forecasts.  

4. Sterling struggles as U.K. threatens Brexit deal

The British pound continued to struggle as the U.K. government moved closer to ripping up its deal with the European Union on how to manage trade on the island of Ireland.

The government will set out new proposals that effectively scrap the internal border between the British province of Northern Ireland and mainland Britain. That border was established as part of the EU Withdrawal Bill enacted by Boris Johnson’s government to safeguard border-free trade between Northern Ireland and the Republic of Ireland.

Sterling has been under pressure all week, as surging Covid-19 cases force more and more people into self-isolation, badly affecting much of the economy.  Nick Allen, chief executive of the British Meat Processors Association, told the BBC earlier that the U.K.’s food supply chains were “starting to fail” as a result of mass self-isolation.

5. Oil shakes off inventories build

Crude oil prices followed risk assets higher, shaking off the first weekly rise in U.S. crude oil stocks since May. Figures from the American Petroleum Institute on Tuesday suggested that inventories rose by over 800,000 barrels, breaking an eight-week streak of draws on stockpiles. The data suggest that U.S. fuel demand, after a vigorous recovery in the spring, may have peaked in the near term.

The government’s official inventory data are due as usual at 10:30 AM ET.

By 6:30 AM ET, U.S. crude futures were up 1.2% at $67.95 a barrel, while Brent crude futures were up 1.2% at $70.15 a barrel.

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