All eyes on Netflix amid key US earnings season, made.com shares sink as it slashes forecasts & miners struggle on China woes

“Speculation that Apple may slow hiring and spending took a bite out of any market momentum overnight and set the tone for a weak start in London on a scorching Tuesday,” says AJ Bell Financial Analyst Danni Hewson.

“The current second quarter earnings season in the US was always likely to be crunch time for markets as investors looked for signs that the weaker economic outlook was weighing on earnings, which until now have held up reasonably well.

“Early signs haven’t been great, albeit with some exceptions, and all eyes will be glued on Netflix when it posts its numbers later today. The streaming service is widely expected to have lost subscribers for a second consecutive three-month period.

“The company is looking at changes to its model as it aims to win the market over, including a plan to place adverts on the platform for certain users and clamp down on password sharing.

“After last week’s disappointing Chinese growth figures, signs of a continuing rise in Covid cases were the last thing markets wanted to hear. Given China is such a big consumer of commodities, this created a negative backdrop for mining outfit BHP. It has followed peer Rio Tinto in warning of a bleaker outlook for demand, as well as rising costs and struggles with availability of labour. After a strong start to 2022, it seems the miners are starting to find life much, much tougher.

“The latest UK jobs numbers will also once again strike fear into the hearts of consumer-facing businesses, as wage growth remains way behind inflation despite the right labour market.”

Made.com

“If you want a clear sign that recession could be on its way, you only need to look at the state of sofa seller Made.com.

“Having warned of a shift in consumer spending patterns in May, the company says things are getting even worse, prompting it to slash forecasts for sales, earnings and cash.

“Faced with the prospect of an economic downturn and a rising cost of living, consumers will naturally take a hard look at their spending. Any ‘nice to have, but not vital’ items will get put to the back of the priority list and a chunk of the population will ultimately conclude they only have enough money for essentials.

“Replacing the sofa, in the case of Made.com, is an obvious thing to put off until another year. Particularly as the media is starting to feature stories about companies putting a freeze on hiring or making small cutbacks to their workforce. That could scare some people into thinking their job is not secure, creating a vicious cycle of further penny-pinching.

“Made.com is also faced with the problem of having to clear excess stock, which means these items are less profitable for the business as it will have to shift them at reduced prices. Simultaneously, profits are also being eaten away by higher supply chain costs.

“It seems Made.com’s life as a listed company was doomed from the start. Its IPO was priced at the bottom of its range when the retailer listed on the London Stock Exchange in June 2021 at 200p per share. Now they trade 88% lower at 23.95p, suggesting this is one of the biggest UK IPO flops in years.”

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