Asia Markets Respond to Earnings Reports from NFLX and TSLA with Mixed Results

Wall Street sees gains, but mixed results from Netflix and Tesla.

Wall Street experienced modest gains in the latest trading session, with the DJIA, S&P 500, and Nasdaq all posting slight increases. However, after-market earnings releases from Netflix and Tesla have resulted in a more mixed performance in US equity futures this morning. Both companies have seen significant gains in their share prices this year, with Netflix up 62% and Tesla up 170% year-to-date. As a result, there were high expectations for positive results, but the morning's reports revealed some weaknesses that were not well-received by investors.

Netflix managed to grow its subscriptions by 8% in the second quarter, indicating some success in its efforts to crack down on password-sharing. However, the company missed revenue expectations for Q2 and provided a lower-than-expected revenue forecast for Q3. This led to an 8.3% drop in Netflix's share price in after-hours trading.

Tesla, on the other hand, exceeded both top and bottom-line estimates. However, its volume growth came at the expense of its operating margin, which decreased from 11.4% to 9.6%. This was due to price cuts and increased discounts. There is also the possibility of further price cuts in the future, as indicated by CEO Elon Musk. Tesla's share price fell 4.2% in after-hours trading.

In addition to the market reaction to Netflix and Tesla's earnings, investors will be keeping an eye on a series of economic data releases in the US. This data will provide insight into the country's economic conditions, including jobless claims and the Conference Board leading index. The Russell 2000, a small-cap stock index, is nearing its key psychological level of 2,000 after surging more than 9% in the past two weeks. If the risk rally continues, the index could see further gains, with its 50-day and 200-day moving averages recently forming a bullish crossover. Reclaiming the 2,000 level could potentially lead to a retest of the 2,110 level.

Asian stocks are expected to have a mixed opening, with the Nikkei down 0.43%, the ASX up 0.81%, and the KOSPI down 0.20% at the time of writing. China's loan prime rate settings remained unchanged, as expected. Australia's jobs data will be closely watched for clues about the Reserve Bank of Australia's next move in interest rates. Currently, rate expectations suggest that there may be one more 25 basis-point hike by the end of the year. However, a weak showing in Australia's labor market could challenge that outlook.

On the earnings front, TSMC's results will be released, with expectations for a 27% decline in quarterly profits and a 13% decline in net revenue compared to the same period last year. This reflects a slowdown in demand for chips. However, given the recent rally in TSMC's share price, there may be expectations for a turnaround in the coming quarters. Validation of this expectation will come from management's guidance.

One surprising development in the market is the recent traction towards value sectors, which has led to a 4.8% increase in the Straits Times Index over the past two weeks. The index initially broke below a symmetrical triangle pattern in early July but found support at its March 2023 bottom. Holding above its 3,270 level could lead to further gains, but more evidence is needed to confirm a trend reversal.

After a significant sell-off in the past two weeks, the USD/JPY pair is attempting to stabilize around the 137.60 level. This level is a key support confluence, with the pair's 100-day moving average and the lower edge of its Ichimoku cloud support coinciding on the daily chart. If the 137.60 level fails to hold, the pair could retest a lower channel trendline at the 135.80 level, followed by the 131.50 level.

Tomorrow, investors will be watching for updates on Japan's inflation numbers. A recent increase in wage pressures has challenged the Bank of Japan's view of inflation as transitory. If inflation data, particularly the core aspect, continues to rise, it could support a more hawkish stance from the Bank of Japan in its upcoming meeting.