Amazing Netflix – Action Forex
Netflix blew past the market expectations last quarter and closed the year on a very high note. The company added 18.9 mio new subscribers last quarter – its biggest ever quarterly jump in subscriptions. The company added more than 41 mio subscribers over the year and has now more than 300 mio subscribers around the world. And it’s not even due to a pandemic or a temporary situation (like the Squid Game peak). It’s because their strategic bet of streaming major live sport events is paying off and hints at a further upside potential. Even more so as the company is planning to raise the price of its services in the US, Canada, Portugal, and Argentina between $1-1.5 depending on the plan which could bring up to $1bn additional revenue to the company. No wonder the company raised its revenue outlook for this year to between $43.5 and $44.5bn. The share price jumped more than 14% in the afterhours trading and will claim the $1000 psychological level, defying yesterday’s shooting star pattern.
More good news for the tech lovers. Trump, together with Softbank and Oracle, announced to invest as much as $500bn in AI infrastructure in the next four years. An initial investment of around $100bn will focus in date centers in Texas to provide the necessary storage and processing capabilities to handle vast amounts of data efficiently. The broader – so called Stargate project – will also include plans for electricity generation to support these data centers, which will also rely on nuclear energy to ensure a reliable and sustainable power supply for the energy-intensive operations of AI systems. Oracle jumped more than 7% on the news, while VanEck’s uranium and nuclear ETF gained almost 5%.
The news also boosted growth and productivity expectations more than they fueled the ballooning debt worries. The US yields were higher yesterday with the 2-year yield is settling around the 4.30% level but the equity indices were better bid despite the rising yields. The S&P500 extended gains by 0.88%. Nasdaq 100 was also up, but the index printed a doji day hinting at some hesitation among the tech investors. Nvidia gained more than 2% on the AI news but Apple’s 3% dive due to a 18% fall in its China sales kept sentiment somewhat mitigated. Note that the meltdown in Chinese numbers resulted in a 5% slide in Apple’s global iPhone sales. But anyway, the US small and mid caps led the rally on hope that Trump’s America First policies would boost domestic industries. And that matched this year expectation of a broadening equity rally beyond the tech and beyond the US borders.
Elsewhere, the Stoxx 600 index gained yesterday and closed a few points below an ATH level defying the morose growth outlook for the European economies. Here, the rally is mostly backed by the big valuation gap between the US and Europe that gets investors looking for gems in Europe. Citigroup’s top investment banker said that ‘you have gems of companies’ in Europe that they sometimes call ‘good houses in bad neighbourhoods’. Rough, right. The good news is that the valuation of good houses in bad neighbourhoods could rise if the overall market conditions are right – and right now, the ECB’s easing policy stance and the bets of convergence in valuations with the US are supportive. But the valuations will certainly be capped by the external constraints, like lack of innovation, overly strict regulations and political issues. And that’s what worries me with the broader European companies. You really have to find those gems.
The same goes for the UK. The UK’s FTSE 100 has printed its third record high in the 3 past sessions, but the index is fueled by global optimism and certainly by weak pound that allows investors to buy UK companies with international businesses at cheaper prices. Happily for Rachel Reeves, though, the gilt yields came further down yesterday after the jobs data showed that the wages grew more than expected but the number of payrolled people fell by 47K – that’s the biggest decline since late 2020 – when the pandemic hit and is a sign that companies are cutting staff on the government’s tax rise plans. This leaves the BoE in a difficult place. The BoE is expected to deliver around 64bp cuts this year. So that reads as two 25bp cuts and maybe a third cut. Cable gained yesterday on the back of a hotter-than-expected wages figures and probably also on the back of crowded US dollar longs that led to a broadbased meltdown in the US dollar. Yesterday’s doji candlestick and, trend and momentum indicators hint that we could see a deeper downside correction in the US dollar. The dollar index could retreat a few pips before threatening to reverse the medium term bullish trends. Technically, the EURUSD will remain in the bearish trend unless it breaks above the 1.06, the major 38.2% Fibonacci retracement on the September to now selloff, while Cable will remain in the negative trend below the 1.2650, its own 38.2% Fibonacci retracement on the September to January selloff.
Elsewhere, US crude remains under pressure, but will likely seek support near the $75.20/75.40pb range – corresponding to the 200-DMA and the major 38.2% Fibonacci retracement that should distinguish between the continuation of the latest positive trend and a medium term bearish reversal.
