Josh Gilbert, market analyst at eToro Group Ltd, shares his three things to watch in Australia in the coming days.
AU consumer confidence
The latest Westpac consumer sentiment reading arrives on Tuesday. This measure is a fairly reliable watermark for consumer attitudes in the country. Sentiment has been improving MoM following a big dip in April. Last week, ANZ-Roy Morgan Consumer Confidence index climbed for a third straight week, up by 1.4pts to 88.6, and Westpac’s June figures will probably indicate similar upward momentum.
That improving optimism last month didn’t convert to a rate cut last week, however. That was a bit of a surprise given most analysts priced the likelihood of a cut above 90%. The RBA made clear in its release that it’s waiting on firmer indicators to confirm inflation is on track, which, given broader global economic volatility, seems prudent.
Consequently, we’ll probably see a similar boost to consumer confidence in this reading, and a more subdued sentiment in the next month’s data, given it’ll be in the wake of the unexpected rate pause.
US inflation
The latest US CPI reading arrives on Tuesday, and it’s set to be an interesting one.
Wall Street is hitting new highs and Truflation data says inflation has dropped below the US Fed’s target threshold. On the surface, the economy looks strong. If we see confirmation of this in the Tuesday figures, it would strongly support the case for a rate cut at the Fed’s next meeting.
However, Jerome Powell likely sees favourable conditions as a short-term bonus, rather than a sign the US is out of the woods, with the true impact of Trump’s threatened tariffs likely to drift well into Q3, now. Core CPI is expected at 2.9% and headline CPI at 2.6% – prints higher than those numbers would put equities on the back foot given the market would dial back rate cut expectations.
It’s also important to remember that the US is, obviously, not invulnerable to the impacts of Trump’s tariff war. Should bluster become action, it’ll hurt households in the States. Combine that with the potential for the roiling Middle East conflict’s potential to bump gas prices up and US inflation could see a bump, meaning a rate cut won’t be the move from the Fed. It may be that we see an echo of the RBA’s action in Australia this month - a pause on the basis that it’s simply ‘too soon to tell’.
Netflix earnings
Netflix Q2 earnings are set to drop Thursday US time, and yet again, a strong performance is anticipated here.
Q1 proved rewarding for Netflix investors, as the company’s ad-support tiers and broader foray into sports broadcasting provided a big boost. These moves are expected to have continued to stoke revenue growth over the last three months.
Netflix is a sophisticated profit engine, and that’s why it continues to dominate the streaming wars. Even-handed diversification of its offering through live broadcasting, while also generating additional revenue from existing users through ads, has proven an effective combo. I would be surprised if the results this quarter don’t please investors.
The unavoidable problem is still on the horizon, however: there is a limit to how much you can grow your earnings when each subscriber is an individual. When you look at Netflix, they have already pulled out the stops that maximise per-user revenue potential; tiered subscriptions, steady cost increases, aggressive ad placement and a crackdown on account sharing. If subscriber count can’t climb that much further, that QoQ earnings growth could stabilise.
For now, though, Netflix has mastered the art of keeping us glued to our screens. The third season of the blockbuster series Squid Game racked up record viewership in its first three days, reinforcing Netflix’s global touch and local appeal. The final season saw more than 60 million views in its first three days, the biggest debut in that time frame. That’s good news heading into the second half of the year.
Shares have rallied over 90% in the last 12 months, cementing their position as the streaming king. The continued rollout of new revenue streams, such as its ad-supported tier and its focus on live sports and localised content, gives Netflix a competitive edge in driving future growth.