Next week at a glance Netflix BoJ ECB

22^nd January – Netflix Inc. Q4 Earnings

The most watched-earnings of the week will come from Netflix, on Monday night after the U.S. market close. It will be the first high-profile ‘tech sector’ giant to report in this earnings cycle and subscription trends may throw light on demand trends for other groups using the model, notably Amazon. Subscription growth is treated as key by investors for the two streaming rivals. In October, the company announced it had over 109 million subscribers globally. Since then, new movies like Bright released in December, TV shows like Dark, in Germany, and established series like The Crown have likely maintained and grown viewers. Industry data suggests Bright, for instance, attracted over 11 million views within days of its release. This indicates that an increase of subscribers might be on the cards. If so, it could be well above the 6.3 million net subscriber additions floated by management for the quarter, and above the 5.3 million added in Q3. (That result was also a beat). Also in focus however, will be whether there has been any moderation of the huge cost base Netflix has built in efforts to ramp up internationally as the U.S. market saturates. That Netflix aims to burn at least $6bn over the long term is well-known. It’s the rate of that expenditure that has perturbed investors recently—though not too much. The stock is already up 15% in January, after a 55% hike in 2017. Consensus for Netflix’s Q4 earnings has been tilting lower in recent weeks, though still points to a rise compared to Q3. The expected range is 37-41 cents a share. The higher end represents guidance. The company made 29 cents a share in Q3, on revenues of $2.9bn, somewhat below $3.2bn guided for Q4.

23^rd January – Bank of Japan Interest Rate Decision

The Bank of Japan stressed the need for ‘patience’ in its last monetary statement. BoJ bond buying has left it as the biggest creditor to the government and this has done wonders for the economy. That includes improving corporate earnings growth momentum as reflected in Nikkei multi-year highs. But inflation remains glacial. Headline CPI is under 1%, though better than deflationary readings in 2016. The BoJ is also running out of levers. It’s literally hitting physical limits in terms of bonds in existence to buy. ‘Yield curve’ control—deciding maturities to buy based on market demand—has also only worked to a point. The BoJ did become more optimistic about growth at its last meeting. Even then though, it batted away suggestions it might soon slow asset purchases. This all points to no policy change on Tuesday. Still, the absence of a move may be what the dollar needs to clearly end a spell of weakness vs. yen.

25^th January ECB Interest Rate Decision

Europe’s Central Bank has been where the BoJ is today and has begun to achieve what Japan’s central bank is aiming for. Its main task now is preparing markets for the removal of the drip. ECB President Mario Draghi has been reluctant to force the economy into the monetary equivalent of cold Turkey. Hence, only some largesse has been removed so far. But €30bn a month—half the prior rate—of bond buys is also becoming difficult to justify as growth gears up. Bond purchases won’t end yet though. So the market is tuned to ‘forward guidance’—verbal commentary— shifting focus to the ECB’s zero-to-negative rates. The rationale is that the bank must first stop talking about bonds and start talking about rates in order to exit asset buying entirely. It takes time. If bond buying ends with 2018, the ECB will regard that as a win. Rates won’t rise on Thursday or anytime soon. The euro might advance further into recent three-year highs though, if that guidance hint is forthcoming.

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