Parsing inflation data, Disney+ disaster, and ING earnings surprise Parsing inflation data, Disney+ disaster, and ING earnings surprise Parsing inflation data, Disney+ disaster, and ING earnings surprise

Parsing inflation data, Disney+ disaster, and ING earnings surprise

Peter Garnry

Head of Equity Strategy

Summary:  Despite many parts of the US consumer price index remains sticky at a high level the headline figures showing inflation is coming down as expected got equities excited and traders to now price 100 basis points of Fed rate cuts by January FOMC meeting. In our view that is a disconnect that is difficult to link to the current economic data unless we get a crisis moment. In today's equity note we also discuss the disastrous performance of Disney's streaming business and in Europe the impressive Q1 results from ING Groep.

Key points in this equity note:

  1. The market’s pricing of the Fed Funds Rate does not square with the economic indicators. It will require a crisis moment to trigger 100 basis points of rate cuts by January.

  2. Disney+ is currently an annualised $2.6bn losing business despite having 158mn paying users destroying shareholder value for Disney shareholders.

  3. ING sends a very upbeat signal to the market with €1.5bn shares buyback programme on top of its already high indicated dividend yield of 4.9%

The disconnect in pricing of Fed cuts

The US April CPI report yesterday boosted sentiment as traders pushed the forward curve on Fed Funds Futures higher (pricing rate cuts) with the market now pricing rate cuts of 100 basis points by the January FOMC meeting. These expectations do not fit with the economy unless we get a severe economic crisis in the second half. Why is that?

US coincident economic indicators are suggesting the US economy is growing at trend growth. Nominal GDP growth is at 7% y/y and the median wage is up 6.4% compared to a year ago. While the US labour market has softened a bit lately it still remains tighter than before the pandemic started back in 2020. Financial conditions have also recently eased despite the crisis among US regional banks which again suggests that the economy is able to absorb the higher interest rates. Finally, it is important to recognize that while the headline inflation is coming down the core service inflation remains high at 6.3% (see chart below). It is not realistic that the Fed will have sustained inflation around their target until very late this year or early next year. It is because of the factors mentioned above that the forward curve seems disconnected and therefore it must a crisis that triggers the Fed Funds rate cut.

One potential crisis that could trigger significant rate cuts are a drastic cut to US government spending to avoid a default. The US government deficit is currently 8% of nominal GDP and thus a significant driver of the strong nominal GDP growth we are observing. If the US government is forced to rein in spending then that could be a significant negative impulse. Cutting the deficit from -8% to -4% would correspond to a 3.7% reduction in government spending and thus potentially triggering a harder than expected recession.

But regardless of this apparent disconnect in Fed Funds futures the equity market liked the inflation report pushing equities higher and signalling that the equity market is still not pricing in a hard recession, but instead a small one in real terms while the nominal economy will just continue to grow.

Disney+ is destroying shareholder value

Years ago Disney decided the future of distribution was streaming and because it was so late to the game it based its entry into the industry on a being a price leader to gain critical mass. The aggressive pricing strategy worked with Disney quickly gaining critical mass with the number of Disney+ subscribers hitting 158mn in FY23 Q2 (ending 31 March) compared to Netflix’s 233mn subscribers.

The critique of Disney from activist investor Nelson Peltz was the cost level which the company earlier agreed was too high and reaffirmed on the earnings call that it is looking to cut costs by $5.5bn this year. But coming back to Disney+, the surprising fact in the earnings release is that Disney lost $659mn on its streaming service, which was lower than the estimated loss of $850mn. How can the company lose $2.6bn on an annual basis for a service with 158mn paying users? But it gets worse, Disney expects the loss in its streaming business to widen in the current quarter. Looking at the earnings release the increase in capital expenditures is mostly related to higher technology spending to support its streaming services. When you look at the operating income breakdown across the various businesses it should be worrying for shareholders as the streaming business clearly has worse financial metrics than linear networks and thus it looks like streaming will destroy shareholder value for quite some time.

Disney earnings slide | Source: Disney

ING signals strong outlook with €1.5bn buyback programme

ING Groep, which is a Dutch financial services firm spanning banking, asset management, and insurance, reported Q1 net income this morning of €1.6bn vs est. €1.2bn with the majority of the beat coming from higher than expected net interest income and lower than estimated loan loss provisions (€250mn less loan loss provisions) suggesting that ING’s customers are able to absorb higher interest rates without causing a big deterioration in the loan book. This is encouraging for both the macro economy and ING shareholders. Management is so upbeat on the future that it is increasing its share buyback programme to €1.5bn compared to a market value of €41.6bn. Management is also stating that it is quite confident on the loan loss provisions for the rest of the year. With an indicated dividend yield of 4.9% the stock has always attracted dividend income investors and with the share buyback programme in place the total yield to shareholders will be close to 8-9% annualised. ING shares are up 4%.

ING share price | Source: Saxo

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (
- Analysis Disclaimer (
- Notification on Non-Independent Investment Research (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.