Farhan Badami, market analyst at eToro Group Ltd, shares his three things to watch in Australia in the coming days.
US / China
Key economic indicators for China will be released this week, including GDP, retail sales and production. The data is dropping against a backdrop of increasing tension between China and the US, after China announced sweeping restrictions on rare earth mineral exports.
The restrictions mean that foreign firms need Chinese Government approval to export goods that contain even tiny amounts of rare earth minerals, meaning that a wide array of computer chip trade will be impacted by these changes, if realised.
Effectively, the changes would significantly upend the global economy in the short term, and the US have responded by threatening China with 100% tariffs on exported goods, which would lead to further turmoil in international trade.
Thankfully, it seems unlikely that this will actually come to fruition. With Trump and Xi expected to meet in the coming weeks, the benefits to China of escalating a trade standoff with the US are clear. Trump has been playing hardball by slapping tariffs on economic opponents and allies alike – this latest development allows China to counter US pressure right from the start, potentially opening them up to a more beneficial resolution to these trade talks.
US Earnings season kicks off
A very big US earnings run kicks off with Netflix and Tesla on Tuesday and Wednesday, respectively.
Tesla’s earnings report last quarter revealed a company caught in transition. Underwhelming vehicle sales, contrasted against the ambitious promises of robotaxis, AI, and energy dominance essentially pitched investors a dream that is still far away from being realised.
What will be worth tuning in for are the investor questions. This time around, investors will be seeking more detail on how or when these emerging divisions will meaningfully move the needle for investors. Robotaxis are on the road, but they are still far from true autonomy or a broader rollout – and the pressure from investors for this to become a revenue stream for the EV manufacturer will only continue to grow.
Realistically, though, investors will probably have to wait until 2026 before we start to see a good news story emerge from the company’s long-term strategy.
Netflix is a different beast altogether. The company has consistently posted impressive results and maintains its grip on the streaming service crown. Last quarter’s updated guidance for full-year sales and operating margins shows that the company’s content strategy is serving it well. The return of household IPs like Wednesday, Squid Game, Love is Blind and the upcoming Stranger Things final season have kept it at the forefront of pop culture.
While the company’s investment into AI is unlikely to have paid off just yet in this round of results, the launch of an ad-supported plan earlier this year will no doubt be a factor in the figures here. The only question is how effective advertising integration has been so far in keeping margins steady, as the streamer increasingly invests in its own content and tech development to drive future success.
US CPI
The latest US CPI figures will be landing on Friday, US time – a week later than planned due to the ongoing US government shutdown. While many government offices remain vacant, some workers have returned to work specifically to produce this week’s data. That highlights the importance of these quarterly indicators, particularly with the November 1 deadline for the Social Security Administration's annual cost-of-living adjustments report (a document that relies on up-to-date CPI data) approaching quickly.
This reading will be interesting. Inflation is rearing its head once again in the US, largely driven by the impact of tariffs and the heightened cost of business logistics now being passed on to consumers. Still, the Fed cut rates in September, and meeting minutes indicated more cuts are in store for 2025, which has clearly kept markets optimistic.
The US labour market still shows signs of cooling as the unemployment rate continues to tick upwards, but the longer-term message from the Fed seems to be one of optimism. Markets will be holding on tightly to that glimmer of hope, especially given there is still no firm end in sight to the current government shutdown.