Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
“Despite last night’s sell-off for US tech stocks including a near-2% decline in the Nasdaq index, European markets were in fairly decent mood on Wednesday thanks to well-received updates from the likes of Deutsche Post and FLSmidth,” says Russ Mould, Investment Director at AJ Bell.
“Weakness in US stocks can be explained by various reasons. Investors have started to worry more about rising inflation. Companies that can pass on higher costs to the customer will be able to protect their profit margins. But some businesses will have to stomach higher raw material costs because they can’t risk raising prices for fear that customers won’t pay extra.
“Other factors troubling investors include the ongoing chip shortage which has a negative impact on big industries such as automotive, disrupting production and putting a cloud on their ability to hit earnings forecasts.
“There are also fears that swift economic recovery in parts of the world will lead to some central banks reducing monetary stimulus earlier than previously expected, which would be negative for stocks and shares.
“Investors must also consider potential tax rises in the future for US companies and when interest rates might rise, particularly as Treasury Secretary Janet Yellen yesterday said rates might have to go up to stop the US economy from overheating.
“Asian stocks were mixed on Wednesday, with Hong Kong’s Hang Seng index falling 0.6% thanks to a sell-off in healthcare and consumer cyclical stocks. The opposite was true with India’s BSE Sensex with those sectors helping to drive up the index by 0.8%.
“The FTSE 100 stubbornly refuses to stay above 7,000 for more than a short while. On Wednesday the UK index traded 0.7% higher at 6,972 thanks to the best efforts of miners and financials. Cyclical stocks were very much in favour, with construction groups CRH and Ashtead also joining the top risers.”
ITV
“The weather may be unseasonably chilly, but the advertising market is heating up according to free-to-air broadcaster ITV.
“Even the biggest devotee of reality show Love Island won’t be as excited about its return as ITV given its importance to driving online viewing.
“The lack of a ‘winter’ Love Island in the first three months of 2021 meant online viewing was down 11% for ITV but when it was stripped out, eyeballs on the ITV Hub were actually up by nearly a quarter.
“The Euros football tournament will provide another reason for people to switch to ITV and combined with the reopening impact, and assuming the UK keeps the virus under control, advertising growth is likely to be very significant for some time to come.
“In order to compare apples with apples, in the remainder of the year it will probably make more sense to compare quarterly advertising revenue growth with the corresponding periods in 2019 rather than 2020 to get a true picture of how ITV is doing.
“Today’s update wasn’t perfect. Some of ITV’s minor channels seem to be losing viewers and while the company continues to make positive noises about its Britbox streaming joint venture with the BBC there are no specific numbers to back this up.
“Ultimately the service may struggle to make waves in the UK but perhaps it can be more successful overseas with South Africa the latest country to receive the platform.
“ITV is fighting to stay relevant having seen both the television market and advertising space heavily disrupted by giant US companies in recent years – Disney, Netflix and Amazon Prime on the streaming side and Google and Facebook competing for advertising spend.
“However, TV as a medium still has reach, particularly with certain sections of the population, and ITV has a chance to prove it still has a place as it benefits from the reopening boom.”
These articles are for information purposes only and are not a personal recommendation or advice.