Amazon’s much-awaited Prime Day turned out to be a disappointment. Netflix’s corporate earnings stunned both the market and itself. Federal Reserve Chair Janet Yellen warns Congress not to enhance its oversight of the United States central bank. The Chinese stock market crash is starting to be contained. The U.S. tech bubble continues to grow exponentially.
These are the five global business headlines from last week.
1. Amazon's Prime Day Disappoints Consumers
The anticipation and hype that surrounded Amazon’s 20th anniversary celebration, otherwise known as Prime Day, quickly fizzled out after consumers were massively disappointed. The event, which was described as being bigger than Black Friday, saw shoppers mock it on social media by complaining about everything- from what was on sale to the very minimal savings.
Social media mentions regarding the company were up 50 percent on Prime Day. However, most of the social media commentary was negative.
Experts say this was a missed opportunity for Amazon. According to pundits on the matter, Amazon simply sold old items that had been piled on in their warehouse inventory. It’s argued that Amazon could have taken advantage of the additional traffic and incorporate numerous cross-selling promotions.
"You don’t see some of the trademark Amazon personalization elements, which is unfortunate because shoppers are stuck looking at irrelevant and even sold out inventory," said Reflektion CMO Kurt Heinemann in a report.
Unsure whether Prime Day is an event here to stay? According to one company employee, it is.
"Going into this, we weren’t sure whether Prime Day would be a one-time thing or if it would become an annual event," said Greg Greeley, vice president of Amazon Prime, in a statement. "After yesterday’s results, we’ll definitely be doing this again."
With that being said, despite all of the negative press that the online retail giant is receiving, it was reported that Amazon sales in the U.S. skyrocketed 93 percent. European sales jumped 53 percent. Simply put: your complaining, it’s laughing all the way to the bank.
2. Netflix Does Better Than Expected
Digital streaming service Netflix surpassed all of analysts’ expectations, even its own (don’t believe the Associated Press report).
In the second quarter (ending Jun. 30), Netflix brought in an extra 30 percent in subscribers, or 3.3 million new subscribers, which is more than the 2.5 million it projected. In total, Netflix maintains a user base of 65 million.
Moreover, its second quarter shares shot up 9.4 percent, which was due to the increase in original television and motion picture programming. Its Q2 revenues jumped by 300 million, though its net income fell slightly because of its expansion into foreign markets.
Soon after the numbers were reported, the stock rose significantly. During the Thursday trading session, the stock went back and forth between $99 and $101. (At the time of this writing, the stock has soared to $115.)
Netflix CEO Reed Hastings warned investors that its on-demand service is set to rise in price over the next few years. It is unknown just how much the streaming service will cost in the coming years.
3. Janet Yellen Warns Congress Over Fed Oversight
During last week’s congressional testimony, Federal Reserve Chair Janet Yellen was on both defense and offense. First she was accused of stifling an investigation into a leaked document of a Federal Open Market Committee (FOMC) meeting to a financial analysis firm. Later, she warned Congress not to enhance oversight of the U.S. central bank.
As Congress debates legislation to boost public oversight of the century-old institution and accelerate audits of the Fed, Yellen is urging Washington to tread cautiously before making any hasty decisions. She noted that any congressional intervention may limit its mechanisms to support the national economy.
“Efforts to further increase transparency, no matter how well intentioned, must avoid unintended consequences that could undermine the Federal Reserve’s ability to make policy in the long-run best interest of American families and businesses,” Yellen said in prepared testimony.
Republicans are attempting to introduce proposals that would improve the management of monetary policy as well as the regulation of the financial industry. The GOP also believes the Fed should be more predictable in regards to how monetary policy is managed.
In other words, Republican lawmakers do not share Wall Street’s obsession over interest rates and their timed hikes.
4. Chinese Stock Market Crash Being Contained
Since the middle of last month, the Chinese stock market has lost more than $3.25 trillion after its bubble finally burst. After years of overinflated stock values and everyone- including their 100-year-old grandmother entering the stock market, the Shanghai Composite Index, Shenzhen market and other Chinese stock exchanges, crashed.
Now, the Communist Party and the People’s Bank of China (PBOC) are intervening. In order to contain the situation, the federal government has repeatedly slashed interest rates, funneled money into the stock market and increased the category of assets to use as collateral to acquire stock (think: one’s house).
Is the turbulence over? Well, for the time being, yes. However, some feel China’s stock market is a lot larger than the subprime mortgage meltdown that brought the U.S. economy to its knees.
Moving forward, China’s biggest financial institutions are lending 1.5 trillion yuan to state-backed Chinese Securities Finances to help ease the destruction of the immense bubble.
“It doesn’t have to use up all the money, as long as it can make the rest of the market believe that it has enough ammunition,” Hao Hong, a China strategist at Bocom International in Hong Kong, told Bloomberg News. “It is a game of chicken. For now, it seems to be working.”
In addition, China has temporarily ceased new initial public offerings (IPOs), purchasing stocks of all sizes, speeding up infrastructure spending, boosting inflation and devaluing the yuan, so that the government will introduce new stimulus spending.
5. U.S. Tech Bubble Continues to Balloon
Talking about bubbles, the U.S. tech bubble just continues to balloon. Is a crash imminent? Well, only time will tell.
According to a chart by Renaissance Capital, June was the biggest month of IPOs since the dot-com bubble era in Aug. 2000.
At the height of the dot-com bubble, when every website was being valued over a billion dollars, 66 companies filed for IPOs. Last month, 35 went public, which is the biggest amount since the dot-com era. These 35 IPOs generated about $6 billion, which is "more than the $5.5 billion raised by the 34 IPOs during the entire first quarter" of 2015.
What’s even more interesting is that many of the 100 companies that have gone public so far this year are unprofitable. Last year, 71 percent of IPO firms didn’t make a single cent in profit. This is up from 46 percent in 2012.
We’re also approaching dot-com era territory, in the amount of funds startups are receiving from venture capitalists and angel investors. In 2014, startup funding hit $47 billion, which actually surpassed the dot-com figures.
The only difference between this bubble and the bubble of the late-1990s and early-2000s, is that today mobile apps are all the rage. Even Fed Chair Janet Yellen conceded to the tech area being in a bubble.
The bubble may eventually burst, however, as the U.S. central bank is on the cusp of raising interest rates.
See Also: July Millennial Data
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