China beat the US to the punch again — not with a computer chip, but with an interest rate cut. 

On Monday, the People’s Bank of China unexpectedly lowered its benchmark lending rates and a noteworthy short-term policy rate, days after leading government officials acknowledged several long-term economic challenges stymieing growth.

Real Estate Headache

The rate cuts come days after China’s top ruling officials completed the once-in-every-five-years third plenum. After the key policy meeting, the government acknowledged a handful of economic pressures — deflation, an ongoing property crisis, rising local debt, and weak sentiment from consumers and businesses — but still pledged to meet this year’s GDP growth target of around 5%.

Data last week showed the economy is off the mark: It grew 4.7% in the second quarter, down from 5.3% in the first quarter. The property crisis worsened in June, with a measure of new home prices in 70 cities falling 0.67%, according to the National Bureau of Statistics, a month after they fell 0.71%. The rate cuts, meanwhile, play out against a delicate balancing act: 

• After the cuts, the yuan fell to a near-two-week low against the US dollar — it’s already down over 2.5% this year (lower interest rates tend to attract less foreign capital and weaken the currency).
• A weaker yuan could boost exports and inflation, but would increase the cost of imported commodities and add to the woes of an indebted property sector that has already defaulted on $123 billion in international bonds, according to Bloomberg. 

Stimulus Check: One senior official suggested Friday that the government will deploy other fiscal tools. Han Wenxiu, the deputy director who heads the Communist Party’s financial affairs, said at a media conference that China will “need to introduce and implement more robust and effective” stimulus measures, owing to a lack of demand and “divergence in the performance between regions, industries, and businesses.” In other words, they’ll keep doing exactly what they’ve been doing until maybe it works. 

Apple may have just raised a white flag in a de-escalating Streaming War.

After years of spending big with little to show for it, the Big Tech giant is attempting to rein in costs at Apple TV+, per a Bloomberg report. Which once again begs the question: What is Apple doing in the streaming business in the first place?

Severance Package

Since launching Apple TV+ in late 2019, the Cupertino giant has spent more than $20 billion creating original movies and TV shows like “Severance” and “Ted Lasso,” often luring big-name Hollywood creatives in the process. But just because it can make this stuff doesn’t mean it should. The company doesn’t report subscriber figures or financials for the streamer, though its share of total TV viewership is so small it doesn’t even track on Nielsen’s Gauge metric — meaning it’s highly unlikely to be anywhere near profitable. Still, the company insists Apple TV+, like its other services, helps sell more devices, where the real money is made. It’s also possible the company is simply making industry inroads now in hopes of emerging as a dominant force if or when the legacy media companies all finally do collapse.

Netflix, on the other hand, is already on strong footing. Last week, the company reported its second-quarter earnings, in which it continued to find additional profitability, showing just exactly what it means to be a Streaming War victor — and how very different it is from Apple:

• Netflix reported almost 278 million global subscribers, up more than 16% year-over-year; meanwhile, some third-party estimates peg Apple TV+’s total subscriber base at just 25 million. Per a Bloomberg analysis, Netflix has more viewership in a single day than Apple TV+ has in an entire month.
• Netflix’s industry-best subscriber base fueled profits of $2.1 billion in the most recent quarter. That’s exceptional for a streamer, but less than one-tenth of Apple’s overall net income in its most recent quarter — making it no wonder streaming is such an afterthought.

But like Apple, and every other media company in the streaming biz, Netflix too is now trimming costs. Unlike the other firms, Netflix’s spending blitz helped it achieve the scale necessary to become highly profitable. 

Downstream: Amazon, the other Big Tech giant with a streaming service side-hustle, has similarly trimmed costs. However, on Monday, the e-commerce giant announced it had acquired the UK-based Bray Film Studios, scooping up valuable production space in the process. It’s part of another trend: In the second quarter, filming in Los Angeles decreased 12% year-over-year, according to an industry group, as the sun sets on Sunset Boulevard, too.

The bottled-up post-lockdown wanderlust may have run out of destinations.

On Monday Ryanair, Europe’s biggest airline said its profits took a 46% nosedive in the most recent quarter, and in response it would have to offer “materially lower” airfares for the busy summer period to attract more fliers. It’s the biggest indicator so far that consumers who were previously willing to bite the financial bullet and buy plane tickets have finally lost their zeal for travel.

Wanderlackluster

Once countries started to lift their COVID-19 restrictions, the airline industry received a predictable rush of demand, which allowed it to drive up airfare. That demand remained steady even as high inflation and cost-of-living crises battered household budgets — the yearning for vacation was that robust. 

That voracious consumer confidence started to show the first signs of wobbling a few months ago, however, and for European airlines, Ryanair’s announcement is already having a serious domino effect:

• Ryanair’s share price fell 15% on Monday, and rival airlines also saw dents. EasyJet’s shares fell 8%, and British Airways owner IAG slid 3%.
• If Ryanair lowers its prices for summer airfares, that will put pressure on other airlines to lower their own prices and thereby stay competitive.

Although fliers are being more discerning on cost, Ryanair said it actually saw passenger numbers rise 10% year-over-year in the last quarter. So people still want to hop on a plane: They just have their limits on price. Reuters reported on Monday that in the US as well, airlines have been forced to offer discounts in order to fill up their planes. 

Blue-Screen Blues: Last week’s record-breakingly huge IT outage is continuing to wreak havoc at some airlines. Delta, which accounted for the vast majority of cancellations caused by Friday’s blue-screen plague, announced on Monday it was canceling another 600 flights, equal to 16% of its flights overall.