The FTSE 100 managed to shake off a big sell-off in Asian markets to trade modestly higher on Friday morning.
The index’s contingent of defensive utilities and tobacco stocks, as well as its big energy names, helped it advance when many of its global counterparts are stuck in the mud.
The news from the Middle East suggests that a restoration of the fragile peace in the region is some way off. Oil prices remain elevated, although have not yet threatened the $100 per barrel levels seen earlier this year.
However, the renewed surge in energy markets is creating concern that the recent moderation in inflation will prove short-lived.
With sentiment brittle, investors are becoming increasingly wary of valuations in the AI and technology sector – most notably in the memory chip space where share prices have surged to unprecedented levels this year.
This is particularly evident in Asian markets, which have also had to absorb weak Chinese growth figures this week and which are particularly exposed to disruptions to global energy supply.
Netflix
Netflix’s latest quarterly numbers had investors reaching for the remote as its forward guidance raised fresh concerns about the company’s growth prospects.
Second-quarter numbers more or less hit expectations but the third-quarter forecast implies the weakest revenue growth in three years and just feeds into concerns about competition and the long-term strategy following its failed attempt to buy Warner Bros Discovery.
Netflix disappointments are on their way to becoming a regular series rather than just a one-off event – with this latest let-down following hot on the heels of poorly received first-quarter numbers.
Netflix may have made its name in streaming but the company is behaving more like an old-fashioned TV network in some areas of its business as it looks for ways to diversify and engage viewers and get them returning to the platform.
Advertising is an increasingly important contributor to revenue as more people sign up to its ad-supported tier. This provides an additional stream of income but one that may end up being more volatile than subscription revenue given how closely ad spend is tied to fluctuations in the wider economy.
The company is also pursuing sport and other forms of live and daily programming, including comedy and awards shows, to give users regular touch points with the platform. Bidding for sports rights is competitive and therefore expensive.
Netflix has increased its prices in 2026 but because it no longer discloses subscription numbers on a quarterly basis, investors are unable to view whether this has led to a meaningful level of cancellations.
Burberry
Burberry looked primed to strut its stuff based on one of its best quarters in years, but a cautious outlook and weak showing in certain markets saw the shares trip up on Friday.
Burberry has moved away from the really high end of luxury to focus on the mid-tier, emphasising the brand’s British roots and concentrating on items where it has heritage appeal like scarves and trench coats.
Encouragingly, this shift under CEO Joshua Schulman saw the company post growth across every product category in the quarter.
This growth is largely supported by the Americas and China, with the Middle East and Europe struggling thanks to the impact of the Iran conflict and reduced tourist spending.
Much as he did alongside the full-year results in May, Schulman dialled up the caution in the tone he adopted on the outlook. While this conservatism might make sense, it’s clear Burberry shareholders would like a bit more to get excited about after years of disappointment.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
