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London Quick Take - 17 July - Semis sell off, Burnham remains quiet, investors switch off Netflix
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
Everything is an AI stock: UnitedHealth blasted earnings expectations out of park and raised its guidance as it deals with higher medical costs and uses AI to improve its operations. The insurer is throwing $1.5 billion at artificial intelligence to streamline operations. UNH expects 2026 adjusted earnings of $19.50 to $20 per share, up from a previous guide of more than $18.25. It stuck to full-year revenue guidance of greater than $439 billion, but CFO Wayne DeVeydt expects the company to "do better than that" given the second-quarter beat.
Everything is market manipulation: Trump Media will sell high-speed access to the president's market-moving social media posts. Truth API will provide "real time access to posts from the highest-ranking Truth Social accounts". And there is no higher ranking Truther than Trump, whose posts can definitely move the market. Paying for the high speed access will mean trading firms get his posts milliseconds earlier than the rest of the crowd...obviously I wonder whether there is an angle here or it's just totally upfront grift: 'I will post stuff that moves the markets and you can pay to get that info before others'.
The unusually quiet Mr Burnham: There has been zero scrutiny on the incoming prime minister. This is hardly a satisfactory state of affairs. It didn't work in the end for Keir Starmer, and he at least had to go the electorate and win a General Election. So it stands even less chance of working for Andy Burnham, who gets about six weeks before he even has to face MPs in the Commons as he takes up office as Parliament goes into recess for the summer.
We know virtually nothing about his economic agenda. He's barely spoken; giving just one speech of note and talking vaguely about council houses. Devolution is not the silver bullet to economic growth. His choice of Chancellor is as yet unknown, although reports that it's likely to be Shabana Mahmood, on the right of the party, appears to have been welcomed by markets and lifted sterling to its strongest in more than a year against the euro, and a two-month high against the dollar.
Yesterday sterling pulled back from these highs though and is weaker this morning – it's perhaps indicative of the fact that the moves in sterling might have been more about an inflation and rates angle – traders unwinding heavy short sterling bets; speculators were the most aggressively short the pound since 2017 - as softer-than-expected US inflation data saw markets slash bets for a July Fed hike, while escalating tensions in the Middle East is driving fears about higher for longer inflation in the UK, which combined with a solid-enough GDP report that suggests the Bank of England could be minded to raise rates. I don't think this is necessarily right and maintain my belief that the market is too ready to price hikes by the Bank of England and not attuned enough to inflation persistency in the US and a regime shift at the Fed that is now much more likely to act proactively and decisively on too-high inflation. Remember that the hawkish pivot we have seen at the Fed is less about the oil/war story (temporary, can look through) than it is about the AI buildout, which is driving price rises in a much broader, stickier and durable way – ie the kind of inflation that the Fed is geared towards fighting. This when US inflation has been above target for 63 months already....UoM inflation expectations survey is due out later.
We're seeing a bit of a shakeout in markets led by semiconductor stocks. Asia took the cue from a sharp fall on Wall Street with the Nikkei 225 down 4%, while the Kospi would have been rattled had it not been for a holiday. The S&P 500 fell 0.5% Thursday, after a slide in Taiwan Semiconductor following its latest earnings weighed on the chip sector. Semis led the Nasdaq Composite down 1.5%, while the Nasdaq-100 broke down further below its 50-day moving average and fell below recent horizontal support under 29k. TSMC slumped 7% in Taiwan. The Philly Semiconductor index is down over 8% for the week and is practically in a bear market. Memory stocks are bearing the brunt with the likes of Sandisk and Western Digital down more than 9%, while chipmakers Micron, Intel, Broadcom and AMD were all down more than 5%. Alphabet shares also fell 4% on reports that its latest Gemini 3.5 Pro model was months behind schedule. SpaceX fell further below its IPO price.
Futures are not getting much help. Netflix shares fell more than 8% in after-hours trade as its earnings forecast disappointed investors. Revenues rose +13% due to a subscription price hike but this was a tiny bit short of expectations and guided for Q3 revenue growth of +12%. The company also said it would deliver fewer updates on its engagement metrics - the What We Watched reports. Shares slumped to $68, crashing through the 200-week moving average...maybe this is the capitulation required for a bullish turn. Questions about its strategy remain following the failed bid for Warner Bros, while it's not really had a big standout hit lately. Viewing is up overall but per subscriber is lower as ad-supported viewers are a bit less engaged and competition is strong. Netflix's numbers are better than the share price implies - the problem is one of engagement which can be solved with the right content mix.
European chip stocks ASML, STMicroelectronics and Infineon were hit this morning with semis weighing on the broader market, though the FTSE 100 is holding up pretty well, notching a gain of +0.2 early doors to climb above 10,600 as it has no semis to worry about, though a couple of the tech investment trusts like Scottish Mortgage and Polar Capital are feeling the heat. Burberry also fell despite posting its best quarter in a long while with revenues +5% higher to £455mn led by strong growth in the US and China, though Europe was a bit soft. Miners and banks are also lower while utilities and defensives are firming up.
All told this seems to be more about a retracement in semis and other AI-related memory stocks etc and not a broad market downturn. The Russell 2k is holding up well and the FTSE 100 has climbed...rotation is still the order of the day. That would change only really if the macro story suddenly changes and the Fed goes hard early on inflation. Oil prices are steady with Brent under $85 while gold has fallen below $4k/oz.
Futures are not getting much help. Netflix shares fell more than 8% in after-hours trade as its earnings forecast disappointed investors. Revenues rose +13% due to a subscription price hike but this was a tiny bit short of expectations and guided for Q3 revenue growth of +12%. The company also said it would deliver fewer updates on its engagement metrics - the What We Watched reports. Shares slumped to $68, crashing through the 200-week moving average...maybe this is the capitulation required for a bullish turn. Questions about its strategy remain following the failed bid for Warner Bros, while it's not really had a big standout hit lately. Viewing is up overall but per subscriber is lower as ad-supported viewers are a bit less engaged and competition is strong. Netflix's numbers are better than the share price implies - the problem is one of engagement which can be solved with the right content mix.
European chip stocks ASML, STMicroelectronics and Infineon were hit this morning with semis weighing on the broader market, though the FTSE 100 is holding up pretty well, notching a gain of +0.2 early doors to climb above 10,600 as it has no semis to worry about, though a couple of the tech investment trusts like Scottish Mortgage and Polar Capital are feeling the heat. Burberry also fell despite posting its best quarter in a long while with revenues +5% higher to £455mn led by strong growth in the US and China, though Europe was a bit soft. Miners and banks are also lower while utilities and defensives are firming up.
All told this seems to be more about a retracement in semis and other AI-related memory stocks etc and not a broad market downturn. The Russell 2k is holding up well and the FTSE 100 has climbed...rotation is still the order of the day. That would change only really if the macro story suddenly changes and the Fed goes hard early on inflation. Oil prices are steady with Brent under $85 while gold has fallen below $4k/oz.
Everything is an AI stock: UnitedHealth blasted earnings expectations out of park and raised its guidance as it deals with higher medical costs and uses AI to improve its operations. The insurer is throwing $1.5 billion at artificial intelligence to streamline operations. UNH expects 2026 adjusted earnings of $19.50 to $20 per share, up from a previous guide of more than $18.25. It stuck to full-year revenue guidance of greater than $439 billion, but CFO Wayne DeVeydt expects the company to "do better than that" given the second-quarter beat.
Everything is market manipulation: Trump Media will sell high-speed access to the president's market-moving social media posts. Truth API will provide "real time access to posts from the highest-ranking Truth Social accounts". And there is no higher ranking Truther than Trump, whose posts can definitely move the market. Paying for the high speed access will mean trading firms get his posts milliseconds earlier than the rest of the crowd...obviously I wonder whether there is an angle here or it's just totally upfront grift: 'I will post stuff that moves the markets and you can pay to get that info before others'.
The unusually quiet Mr Burnham: There has been zero scrutiny on the incoming prime minister. This is hardly a satisfactory state of affairs. It didn't work in the end for Keir Starmer, and he at least had to go the electorate and win a General Election. So it stands even less chance of working for Andy Burnham, who gets about six weeks before he even has to face MPs in the Commons as he takes up office as Parliament goes into recess for the summer.
We know virtually nothing about his economic agenda. He's barely spoken; giving just one speech of note and talking vaguely about council houses. Devolution is not the silver bullet to economic growth. His choice of Chancellor is as yet unknown, although reports that it's likely to be Shabana Mahmood, on the right of the party, appears to have been welcomed by markets and lifted sterling to its strongest in more than a year against the euro, and a two-month high against the dollar.
Yesterday sterling pulled back from these highs though and is weaker this morning – it's perhaps indicative of the fact that the moves in sterling might have been more about an inflation and rates angle – traders unwinding heavy short sterling bets; speculators were the most aggressively short the pound since 2017 - as softer-than-expected US inflation data saw markets slash bets for a July Fed hike, while escalating tensions in the Middle East is driving fears about higher for longer inflation in the UK, which combined with a solid-enough GDP report that suggests the Bank of England could be minded to raise rates. I don't think this is necessarily right and maintain my belief that the market is too ready to price hikes by the Bank of England and not attuned enough to inflation persistency in the US and a regime shift at the Fed that is now much more likely to act proactively and decisively on too-high inflation. Remember that the hawkish pivot we have seen at the Fed is less about the oil/war story (temporary, can look through) than it is about the AI buildout, which is driving price rises in a much broader, stickier and durable way – ie the kind of inflation that the Fed is geared towards fighting. This when US inflation has been above target for 63 months already....UoM inflation expectations survey is due out later.
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