A Postman pat down
Stocks in Europe were mostly higher on Thursday after central bankers brushed aside inflation concerns to suggest no end in sight to monetary stimulus. Global equites have been subdued in anticipation of Donald Trump’s inauguration.
The FTSE 100 unperformed equities on the continent, as it has done since ending its record winning streak this week. Strength in retail shares after well-received Christmas sales numbers wasn’t enough to overpower a downturn in heavily-weighted mining shares.
Pearson shares atop the FTSE 100 will be little consolation to shareholders after Wednesday’s drubbing when the publisher issued a profit warning and cut its dividend. Royal Mail was worst performer on Thursday as concern remerged over the terminal decline in UK letter volumes.
Retailers including Burberry and B&Q-owner Kingfisher gained ground in a positive read-across after N Brown and Halfords saw strong Christmas sales growth. Gains in the British pound and a pullback in metals prices have undermined enthusiasm for the basic resource sector this week.
Strength in the UK economy and a clearer outlook for Brexit negotiations are reasons we think firms with a more domestic presence stand to outperform in the near term. A rotation out of multinationals including pharma and mining will reduce exposure to a firming up of the British pound.
Making a murderer and record highs
Shares of Netflix pushed into fresh record territory after the online streaming firm reported surprisingly large subscriber growth.
Netflix has the first-mover advantage in video streaming which has enabled a rapid global rollout of its services. The risky decision by management to focus on its Netflix Original content instead of delivering film studio content available elsewhere has really paid off. The influx of new US subscribers has allayed concerns growth had hit a plateau in its home market.
We see Netflix shares continuing the recent momentum despite the tech sector as a whole falling out of favour since the US election. The biggest risk to this outlook is that traditional TV broadcasters move from “linear” to Netflix-style “binge” content. It will take a lot of resource to make local content for the nearly 200 counties Netflix has a presence in.
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