Gaza update, Chinese GDP, Netflix earnings - what's moving markets

October 18, 2023 5:16 AM EDT -- U.S. President Joe Biden heads to Israel, while crude prices soared as a missile explosion on a Gaza hospital esclated tensions in the Middle East. The earnings season continues with numbers from Netflix and Tesla, while Chinese GDP expanded by more than expected in the third quarter.

1. Biden heads to Israel

U.S. President Joe Biden flies to Israel on Wednesday in an attempt to soothe heightened tensions in the region after a missile strike on a Gaza hospital killed hundreds of Palestinians.

Palestinian officials said an Israeli air strike hit the hospital, while Israel blamed the blast on a failed rocket launch by Palestinian militants. Both sides denied responsibility.

The news has inflamed an already tense situation and resulted in a planned summit between the U.S. president, Palestinian President Mahmoud Abbas and Egyptian President Abdel Fattah al-Sisi being cancelled.

Biden will meet Israeli Prime Minister Benjamin Netanyahu and the Israeli war cabinet later Wednesday, but it’s debatable what he can achieve given the circumstances.

Meanwhile, the United Nations Security Council is set to vote later Wednesday on a resolution that calls for humanitarian pauses in the conflict to allow humanitarian aid access to the Gaza Strip.

2. Futures just lower as earnings season continues

U.S. stock futures traded with minor losses Wednesday, as investors digested more quarterly corporate earnings.

At 05:00 ET (09:00 GMT), the Dow futures contract dropped 23 points or 0.1%, S&P 500 futures fell 7 points or 0.2%, and Nasdaq 100 futures dropped 40 points or 0.3%.

The major indices traded in a muted fashion Tuesday, but corporate results have generally been impressive at this early stage of the third quarter earnings season.

So far, 83% of companies have so far topped earnings expectations, while about 70% have surpassed sales estimates, according to FactSet data.

Big tech companies take the earnings lead today [see below], but United Airlines (NASDAQ: UAL) will also be in the spotlight after the carrier issued disappointing fourth-quarter guidance after the close Tuesday, with higher fuel costs and the suspension of Tel Aviv flights expected to weigh.

JB Hunt (NASDAQ: JBHT) stock also traded lower premarket after the transportation and logistics company fell slightly short on profit expectations in the third quarter.

There are also fresh economic numbers to digest, in the form of housing starts and building permits data for September.

3. Netflix expected to receive subscriber boost

The quarterly earnings continues in full flow Wednesday, with results from streaming giant Netflix (NASDAQ: NFLX), after the close, the day’s highlight.

Netflix suffered a weak quarter last time out, but investors are hoping for better news as its efforts to restrict sharing of accounts could lead to a pick-up in subscriber growth.

Netflix's crackdown on password-sharing is expected to have boosted subscribers by about 6 million in the third quarter, and investors will be looking to see whether this sets the stage for price increases in an attempt to further increase revenue.

Tesla (NASDAQ: TSLA) is also due to report after the close of trading, with the electric vehicle manufacturer having already disclosed its third-quarter vehicle delivery and production numbers, which drive the vast majority of the company’s revenue.

Earlier this month, Tesla confirmed that it delivered just over 435,000 electric vehicles during the third quarter - not breaking a delivery record for the first time in a long time.

Morgan Stanley (NYSE: MS) leads the way before the open, and the banking giant is likely to follow its peers in benefiting from rising net interest income, driven by higher interest rates and loan growth.

4. China’s 3Q GDP grows more than expected

China may have turned the corner, after data released earlier Wednesday showed that the Asian giant’s economy grew at a faster-than-expected pace in the third quarter from a year earlier.

Gross domestic product grew 4.9% in July-September from the year earlier, a drop from the 6.3% expansion in the second quarter, but still considerably better than the expected 4.4% increase.

On a quarter-by-quarter basis, GDP grew 1.3% in the third quarter, accelerating from a revised 0.5% in the prior quarter.

Additionally, China's industrial output in September grew 4.5% from a year earlier, matching the pace in August, and retail sales rose 5.5% in September, accelerating from a 4.6% increase the month earlier.

The world's second-biggest economy has started to show signs of stabilising, helped by a series of stimulus steps from Beijing, although a durable recovery could be hampered by the ongoing crisis in the country’s real estate sector.

There has been no word of Country Garden, China's biggest private property developer, paying a $15 million coupon due, fuelling expectations that it has defaulted on its offshore debt.

Non-payment would trigger cross defaults in other Country Garden bonds, likely prompting one of China's biggest corporate debt restructurings.

5. Crude soars after Gaza hospital explosion

Oil prices soared Wednesday after a deadly blast at a Gaza hospital heightened tensions in the Middle East, thwarting a U.S. diplomatic effort in the Israel-Hamas war.

By 05:00 ET, the U.S. crude futures traded 2.6% higher at $87.66 a barrel, while the Brent contract climbed 2.5% to $92.11 a barrel.

The explosion at the crowded hospital in Gaza, which was blamed on both Israeli and Hamas forces, has renewed concerns that a spillover of this conflict could disrupt crude supplies in the oil-rich region as a planned summit between U.S. President Joe Biden and Egyptian and Palestinian leaders was cancelled.

The crude market had received a boost late Tuesday after data from the American Petroleum Institute indicated that U.S. inventories fell a hefty 4.4 million barrels in the week to October 13.

This draw comes after a bumper build in the prior week, which also saw U.S. production reach new peaks, and diluted worries about a reduction in demand in the world’s largest consumer.

Official data from the Energy Information Administration is due later in the session, for confirmation.

You May Also Be Interested In

Related Categories

Investing, Trader Talk

Related Entities

Morgan Stanley, Standard & Poor's, Raising Prices, Crude Oil, Tesla, Earnings