While you were sleeping: IMF downgrades, Netflix drops

Wednesday 20th July 2016

Wall Street moved lower as disappointing earnings from Netflix, among others, and the International Monetary Fund’s downgrade of its outlook for the global economy weighed on sentiment.

The IMF cut its forecasts for global economic growth this year and next as the unexpected UK vote to leave the European Union creates a wave of uncertainty amid already-fragile business and consumer confidence, it said in a statement.

The IMF now predicts the global economy will expand 3.1 percent this year and 3.4 percent in 2017, with both estimates downgraded by 0.1 percentage point.

"Had it not been for Brexit, the IMF was prepared to leave its outlook for this year broadly unchanged as better-than-expected euro area performance offset disappointing US first-quarter growth," the IMF said.

The IMF also had been prepared to raise its outlook for 2017 slightly, by 0.1 percentage point, on the back of improved performance in a few big emerging markets, in particular Brazil and Russia, it noted.

Shares of Netflix tumbled, down 13.7 percent as of 2.57pm in New York, after the company’s latest quarterly results bolstered concern about its tepid subscriber growth.

It wasn’t all bad news. Shares of Johnson & Johnson rose after the company posted quarterly earnings that surpassed expectations and upgraded its sales outlook for the year.

"We continue to see good momentum through the first half of 2016, delivering solid results in the second quarter, supported by strong underlying growth across our enterprise,” Johnson & Johnson CEO Alex Gorsky said in a statement.

"We saw notable strength in our Pharmaceuticals business due to the continued success of new products, and also achieved significant clinical milestones, advancing our robust pipeline,” Gorsky said.

In 3.04pm trading in New York, the Dow Jones Industrial Average rose 0.01 percent. The Nasdaq Composite Index fell 0.5 percent. In 2.48pm trading, the Standard & Poor’s 500 Index declined 0.2 percent.

The Dow edged higher, as gains in shares of McDonald’s and those of Johnson & Johnson, recently up 2.2 percent and 1.4 percent respectively, offset slides in shares of Microsoft and those of Goldman Sachs, last down 1.5 percent and 1.4 percent respectively. Microsoft reports results after the closing bell.

Monsanto said it rejected Bayer's latest takeover offer “as financially inadequate and insufficient to ensure deal certainty,” adding that it remains open to further talks with the Germany company.

Earlier this month Bayer raised its previously-rejected bid for Monsanto to US$125 a share in cash, up from an initial US$122 a share.

Bayer is "disappointed" in Monsanto's decision to reject its latest offer, the Germany company said in a statement, adding that it is looking forward to further talks with Monsanto.

Shares of Monsanto traded 0.03 percent weaker at US$106.41 as of 1.42pm in New York, after earlier in the session rising as high as US$109 and falling as low as US$105.41.

Shares of Bayer closed 0.3 percent lower in Frankfurt.

Europe’s Stoxx 600 Index ended the session with a retreat of 0.4 percent from the previous close, as mining stocks fell. France’s CAC 40 index fell 0.6 percent while Germany’s DAX index dropped 0.8 percent. The UK’s FTSE 100 index eked out a 0.03 percent gain.

European Central Bank President Mario Draghi will speak on Thursday after the central bank’s first monetary policy gathering since the UK decided to leave the European Union.

“The ECB event is going to be the major point of interest for markets this week,” Daniel Murray, head of research at EFG Asset Management in London, told Bloomberg. “I suspect they will leave things unchanged, but investors will monitor closely what Draghi says afterwards.”

BusinessDesk.co.nz

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