Daily Update: October 25, 2021

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

While Netflix won the first round of the streaming wars, new, well-funded competitors, and hard-to-change consumption habits may make it challenging to realize further growth.

According to S&P Global Market Intelligence, North America is already a mature video market. U.S. audiences haven’t fundamentally changed their viewing habits during the streaming revolution. Most Americans continue to watch about eight hours per day of TV, including streaming and traditional pay television. This has left Netflix with relatively flat growth in the U.S. and Canada after an initial spike in subscriptions during the early days of lockdowns.

"The low-hanging fruit has already been picked in terms of subscribers. Where is the growth going to come from?" said Seth Shafer of S&P Global Market Intelligence. "I do think we're going to see a new normal for what we consider good numbers."

But content remains king for streaming services, and Netflix has enjoyed two quarters in which it has beaten membership targets thanks to “Squid Game” – a dystopic Korean series that has become an unexpected hit for the company. However, according to S&P Global Market Intelligence, some analysts question Netflix’s current valuation, believing that the 24x multiple is unjustified given numbers that point to slower subscriber growth.

The company isn’t sitting still in the face of increased competition. S&P Global Market Intelligence estimates that Netflix amortized $13.6 billion on content in 2021. Over time, the company has shifted from having acquired most of its content from production companies to producing more original content. By 2025, original content and acquired content is expected to be at parity.

Meanwhile, renewed lockdowns in Europe and elsewhere have generated increased revenues for traditional pay television as well. But much of the increase in revenues for U.S. cable network companies in 2021 has come from their own experiments with streaming services.

Today is Monday, October 25, 2021, and here is today’s essential intelligence.

Uncertainty in the Global Economy

Listen: The Essential Podcast, Episode 48: Just In Case – Reimagining Supply Chains For An Unstable World

Shanella Rajanayagam of HSBC joins the Essential Podcast to explain the changing necessities of global supply chains and how a Just-In-Time model is being replaced in many sectors by a Just-In-Case model.

—Listen and subscribe to the Essential Podcast, a podcast from S&P Global

The Credit Cycle

Default, Transition, And Recovery: China-Based Sinic Holdings' Missed Bond Payment Pushes The 2021 Global Corporate Default Tally To 63

The 2021 global corporate default tally increased to 63 this week following the default of China-based (Cayman Islands-incorporated) real estate developer Sinic Holdings (Group) Co. Ltd. after the issuer failed to repay the interest and principal on its US$250 million offshore senior unsecured notes due on Oct. 18, 2021.

—Read the full report from S&P Global Ratings

Leveraged Finance: U.S. Leveraged Finance Q3 2021 Update: Leverage Is Getting Better (Almost) All The Time

Despite supply-chain constraints and a resurgence in the pandemic with the delta variant, market confidence remained strong during the third quarter, with participants largely optimistic about the near and medium terms. 

—Read the full report from S&P Global Ratings

Market Dynamics

S&P China 500 Fell 10.5% In Q3, Pushed Lower By Consumer And Tech Stocks

The S&P China 500 declined 10.5% during Q3 2021, succumbing to dramatic losses across consumer- and technology-driven companies. Performance also continued to lag the broader S&P Emerging BMI and S&P Developed BMI, which fell 6.2% and 0.4%, respectively.

—Read the full article from S&P Dow Jones Indices

Banking Industry Under Pressure

Turkish Lira Turmoil Thwarts BBVA's Success In Once-Promising Market

The rapid weakening of the Turkish lira is diluting the strong performance of Banco Bilbao Vizcaya Argentaria SA's business in its third-largest market despite the Spanish banking giant having significantly hedged against the currency's depreciation in 2021.

—Read the full article from S&P Global Market Intelligence

U.K. Banks Subject To Highest Pillar 2 Requirements Among Major European Lenders

Five U.K. lenders — Barclays PLC, Lloyds Banking Group PLC, NatWest Group PLC, Standard Chartered PLC, and HSBC Holdings PLC — sit in the top six of a selection of 20 large European banks ranked by Pillar 2 requirements. All five are required to hold a Pillar 2 capital above 1.50%, with three having a requirement of 2.0% or more.

—Read the full article from S&P Global Market Intelligence

Technology & Media

PayPal Investors Not Pinning Hopes On A $45B Pinterest Deal

PayPal shares were down 9.4% week to date as of Oct. 21, while shares of the image sharing platform soared 16.5%. The drop in PayPal shares reflects investor concerns over PayPal's ability to turn a profit from such acquisitions.

—Read the full article from S&P Global Market Intelligence

ESG in the Time of COVID-19

Steel Vs Plastics: Race To Sustainability

The steel and plastics industries, as some of the leading carbon emitters, have come under increasing pressure since the 2015 Paris Agreement, with China's banning of 24 types of solid waste imports in 2018 proving a watershed moment for both sectors.

—Read the full article from S&P Global Platts

China Sets Action Plan To Cut Emissions, Enhance Efficiency In Oil, Chemicals Industries By 2025

China's National Development and Reform Commission has introduced a new series of action plans for key industries in an effort to enhance energy efficiency and accelerate the country's peak carbon emissions and net-zero timeline targets.

—Read the full article from S&P Global Platts

U.S. Utility Q3 Earnings Calls To Focus On Federal Climate Plans, Stagflation Risk

Utilities and their investors are also keeping a close eye on Washington and any developments related to U.S. President Joe Biden's infrastructure investment and clean energy agenda.

—Read the full article from S&P Global Market Intelligence

U.S. PE Catches Up To Europe Peers On ESG, But Obstacles Remain

Many newer funds now have "ESG provisions and covenants baked in," and large banks and financial institutions are mandating ESG as a component in their lending criteria, Hameer Vaid and Hunt Holsomback of Alvarez & Marsal Holdings LLC's private equity performance improvement service said in an interview. 

—Read the full article from S&P Global Market Intelligence

The Future of Energy & Commodities

Listen: Cracking & Fracking - Episode 14

In this episode of Cracking & Fracking, Tom Watters discusses the causes of the global energy crisis, could it get worse and what’s the likelihood this scenario plays out in the U.S. Tom also discussed our recent change to our hydrocarbon price deck and what it means for ratings.

—Listen and subscribe to Cracking and Fracking, a podcast from S&P Global Ratings

Gas Price Spike Puts Green Hydrogen At Cost Parity With Fossil Fuels

Green hydrogen in Europe, produced by electrolysis of water powered by renewable electricity, is already competitive with hydrogen produced from fossil fuels in the current natural gas market environment, leading companies in the sector said.

—Read the full article from S&P Global Platts

European Gasoline, Diesel Car Sales Poised To Lose Market Dominance As EVs Surge

Surging sales of hybrid and fully electric vehicles in Europe remained strong in the third quarter of 2021, helping to shrink the market share of conventional gasoline and diesel cars to 55% of the regional market, according to new data.

—Read the full article from S&P Global Platts

EU Leaders Ask EC To Study Gas, Power, CO2 Markets Amid Energy Crisis

The European Council on Oct. 22 released the conclusions of its meeting of Oct. 21-22, with EU member states scrambling to find agreement on an overall position as Europe battles with surging energy costs and concerns over the impact on businesses and consumers.

—Read the full article from S&P Global Platts

Biden Blames OPEC For High Oil Prices, Sees U.S. Fuel Costs Easing In 2022

U.S. President Joe Biden late Oct. 21 blamed the current high oil prices on OPEC withholding supply but ultimately dismissed the idea that he might try to persuade the producer group to increase production.

—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.