It’s been a slightly better day for stock markets in Europe as they continue to fluctuate in the same ranges they’ve traded in for the last month.
US indices are having a mixed start, with the Dow outperforming, up around 1%, while the S&P is managing small gains and the Nasdaq is getting hit in the aftermath of Netflix’s results.
The tech sector has had a rough year as a result of the drastically changing interest rate environment and results like those from Netflix don’t help. The growth model has been a big attraction for many of these big tech names and Netflix is suffering in the aftermath of the pandemic turbo-charged growth phase.
The first decline in user growth in more than a decade already made for tough reading but combined with the expectation of another loss of two million in the second quarter has investors asking very big questions. In a time of households budgets being squeezed, how high up the list are streaming services like Netflix when it comes to cutting back? What other tech services are easy to dispose of? This could become a major problem in the quarters ahead and the company needs to act fast, something investors seemingly don’t feel confident about as the stock plunges another 35%.
US housing data could come under further strain
US existing home sales fell by 2.7% in March to 5.77 million annualized in a further sign of the housing market cooling amid higher interest rates, high prices, low inventory and a higher cost of living.
Households are being squeezed from all angles and that’s clearly starting to affect spending behaviour which could feed into other segments of the economy in the coming months. With rates set to rise much further and faster than we’ve seen in decades, the housing data may come under further strain even if the inventory problem can be overcome.
How long will BoJ sustain yield resistance?
Central banks are naturally under the spotlight at the moment and for different reasons. At one end of the scale is the Fed which is desperately trying to communicate its aggressive tightening plans as it tries to play catchup on inflation. In the middle is the ECB which is continuing to push back but slowly coming around, with Mārtiņš Kazāks today suggesting a rate hike could come as soon as July. That may be a bit optimistic but the message is clear.
Then there’s the Bank of Japan. There is no runaway inflation in Japan and yet, policymakers are facing other issues as a result of their Yield Curve Control policy tool. With yields being pulled higher alongside those elsewhere, the BoJ’s upper bound is being tested, forcing it to commit to unlimited purchases in order to maintain the policy. The yen is sliding as a result which is also making officials uncomfortable. How long can this go on?
Bitcoin facing further pressure?
It’s been a volatile few days for bitcoin but it hasn’t really moved on from where it was a week ago. It continues to hover around USD 40,000 and is struggling to generate any upside momentum which may come as a concern to some. It did see strong support at the start of the week when it tumbled but that may not be the case if it continues to be tested.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
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