| By David Goldman • Tuesday, January 21 | | | | Good morning. David Goldman here. I'll be filling in this week for Julia, who's reporting from the World Economic Forum's annual meeting in Davos.
In today's newsletter: Netflix tries to fend off growing competition, a deadly virus rattles Asian markets and climate change continues to unsettle long-term investors.
US stock futures are pointing lower after a three-day weekend. Markets in Europe also fell, along with stocks in Asia.
▸ Forwarded this newsletter? Want global markets news and analysis from CNN Business reporters every morning? You can sign up here. | | | What's happening now in markets: MARKET DATA AS OF 6:05 AM ET | | MARKET FLASH It's Netflix's time to prove itself
Netflix is set to report earnings after the bell Tuesday, and investors are cautiously optimistic that the world's largest streaming service can continue to keep competitors at bay. But that task is growing increasingly difficult.
What's happening: Netflix has 158 million subscribers worldwide, dwarfing its competition. For years, it was able to put plenty of sunlight between it and its rivals by spending big money on original content and using computer wizardry to determine just what kind of shows its customers wanted to watch. (People seem to like true crime documentaries, social media sleuths and cats.)
But Disney+ is growing ... fast. Wall Street analysts believe the streaming service added more than 20 million customers in its first few weeks, and the company may hit its 2020 end-of-year targets far sooner than expected. It's brought forward its European launch too. Amazon Prime Video continues to grow, HBO Max is around the corner, and NBC just announced its new streaming service, Peacock. (HBO is owned by WarnerMedia, CNN's parent company.)
That competition has hurt Netflix's stock. | | Netflix's stock is down nearly 4% over the past year, a particularly dreadful performance given the S&P 500 gained about 29% in 2019. The stock has rebounded significantly in the past several months, however: It's up 5% in January and has gained nearly 16% since late October.
The competition: The company restored some confidence among investors after posting relatively solid subscriber additions in the third quarter. But that was before Disney+ launched in November and "The Mandalorian's" Baby Yoda character warmed the hearts of millions of Star Wars' fans.
So the fourth quarter — the first in which Netflix went head-to-head with Disney+ — was the true test. The company is optimistic: It estimated that 7.6 million new subscribers signed up for Netflix during the last three months of 2019.
What investors are watching: Wall Street will pay close attention to whether Netflix can hit that lofty target. But it will also keep a close eye on Netflix's profit margin. The company spent $18 billion on original content over the past year. Although Netflix remains profitable, it's not exactly churning out earnings.
If Netflix misses its targets, the stock could go on a bumpy ride: The stock rose or fell by an average of 7% the day after it posted earnings over the past four quarterly announcements, according to Refinitiv. That includes a more-than-10% dip in the second quarter after the company said it missed its subscriber targets. | | VOICES On "green swan" risks "Green swans are different from black swans because there is some certainty that climate change risks will one day materialize, which could endanger humanity more than financial crises, and they threaten even more complex and unpredictable chain reactions."
JIM REID, DEUTSCHE BANK
Read more from CNN Business. | | DATA POINT Asian markets rocked by coronavirus | |
China confirmed that the Wuhan coronavirus — a disease that has killed at least six people and sickened hundreds in the country — can be transmitted between humans.
There have been no confirmed cases of the virus in Hong Kong. But there have been 14 cases in neighboring Guangdong province, including one in nearby Shenzhen. Taiwan has reported its first case after a woman fell ill after stepping off a flight from Wuhan.
Asian markets took a beating Tuesday: China's Shanghai Composite (SHCOMP) slumped 1.4%, while South Korea's Kospi (KOSPI) and Japan's Nikkei 225 (N225) closed down 1% and 0.9%, respectively.
More pain: Adding to pressure on Hong Hong stocks was a credit-rating downgrade by Moody's, which cut the city's long-term rating by one notch to Aa3 from Aa2.
"The absence of tangible plans to address either the political or economic and social concerns of the Hong Kong population that have come to the fore in the past nine months may reflect weaker inherent institutional capacity than Moody's had previously assessed," Moody's said. | | UP NEXT
Capital One, IBM, Netflix, and United Airlines report results after US markets close.
Coming tomorrow: Earnings season marches on with results from Johnson & Johnson and Texas Instruments. The latter will shine a light on the health of American chipmakers.
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WHAT WE'RE READING AND WATCHING
▸ Huawei CEO: We can survive a tougher fight with the US (CNN Business)
▸ Tesla aims to replicate China success with German factory (WSJ)
▸ Trump acclaims his own economic achievements (Bloomberg)
▸ Greta Thunberg: 'Nothing has been done' (CNN Business)
▸ Eurozone corporate loan demand slides for first time in six years (FT)
▸ Uber sells its India food business (CNN Business) | | | FINAL WORD Global growth expectations are ... growing A day after the International Monetary Fund trimmed its global growth forecast, Bank of America released a survey of investors who say they are increasingly bullish on the world economy.
The percentage of investors who expect growth to improve this year grew by seven percentage points to 36% in Bank of America's January survey, the bank said Tuesday morning. Although that's still a minority of investors, it's the highest percentage since February 2018.
The IMF now expects 3.3% growth in 2020, down from its 3.4% projection in October. | | | | |
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