Business
Morning Bid: Early Labor Day for markets
Sept 1 – A look at the day ahead in U.S. and global markets from Mike Dolan
Labor Day comes a bit earlier for markets this year, with Friday’s release of the critical August jobs report coming just ahead of Monday’s end-of-season U.S. holiday.
Investors are praying the former doesn’t usher in The Fall.
Judged by the torrent of labor market soundings we’ve seen already this week, a negative surprise from the national employment picture later on Friday seems unlikely.
Consensus forecasts for a slight slowdown in the monthly hiring pace to about 170,000 additional non-farm payrolls last month, and a jobless rate steady at just 3.5%, would tally with the picture painted by other employment measures this week.
A series of updates showed private sector hiring slowing in August, while job openings fell back in July and layoffs jumped.
On the flipside, more up-to-date weekly jobless claims fell again and the consensus payrolls estimate has ticked higher from 150,000 only last week.
Some loosening of the super-tight labor market and ebbing of brisk wage growth is seen by many as a critical condition to stay the Federal Reserve’s hand in tightening one more time this year. Going into Friday’s report, futures markets remain split and stand 50-50 on the chances of another hike by November.
Although slightly dated at this stage, the July reading of the Fed’s favoured PCE inflation gauge ticked higher, spending was robust and economists at JP Morgan sharply revised up their economic growth forecast for the current quarter by a full percentage point to 3.5%.
An update from the Atlanta Fed’s real-time GDPNow estimate, which last week clocked an annualised growth rate for Q3 of 5.9%, will also be watched very closely later on Friday.
Beyond Wall St, which took a step back on Thursday, the broader world markets mood has picked up in the early hours of September. Helping that was another series of Chinese credit and mortgage easing and tentative signs from private surveys that factories there are finally pulling out of a slump.
Although Hong Kong was braced for the onset of Typhoon Saola, China’s mainland shares (.CSI300) rose 0.7% on Friday.
In the background, markets there are also watching embattled Chinese developer Country Garden (2007.HK) after the firm delayed a deadline for creditors to vote on whether to postpone payments for an onshore private bond to Friday.
In Europe, investors are also split on whether the European Central Bank is done tightening ahead of this month’s policy meeting, after data showed inflation remained sticky above 5% last month. A factory survey on Friday showed the downturn in euro zone manufacturing eased last month.
And whatever they think about peak rates, markets are also grappling with the prospect of rates staying up here for some time.
The International Monetary Fund’s No. 2 official Gita Gopinath said the IMF expected global interest rates to remain high for “quite some time,” adding that rates might never return to the era of “low for long” given the possibility of more frequent adverse supply shocks.
In corporate news, shares in Broadcom slipped 5% pre-market after its fourth-quarter revenue outlook missed forecasts overnight.
More generally, S&P500 futures were up slightly – as were European bourses. Treasury yields were steady at this week’s lows and the dollar (.DXY) was softer. China’s offshore yuan outperformed despite the loan rate cuts.
Events to watch for on Friday:
* U.S. August employment report, U.S. August manufacturing sector surveys from ISM and S&P Global, U.S. July construction spending. Canada’s latest Q2 GDP estimate
* Cleveland Federal Reserve President Loretta Mester speaks, Atlanta Fed President Raphael Bostic speaks
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Business
Netflix’s subscriber growth slows as gains from password-sharing crackdown subside
Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.
The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.
Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.
The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.
The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.
The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.
The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.
Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.
In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.
“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.
As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.
Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.
The Canadian Press. All rights reserved.
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