European markets shrugged off US inflation concerns which prompted a wobble on Wall Street.
The FTSE 100 advanced 0.8% to 10,835, putting it ever closer to hitting the magic 11,000 level. It only needs to rise a further 1.5% to win the prize. Hitting 11,000 would have psychological benefits, and doing so could help win over naysayers who say the UK market has nothing to offer.
The UK stock market has been under the spotlight in recent weeks as tech stocks went off the boil. Its low technology exposure is proving to be an advantage, particularly for investors who want to dial down tech in their portfolio and relocate money to more defensive-style industries. The FTSE 100 has these in spades, such as insurance, utilities and consumer staples stocks.
Even though certain investors bought tech stocks on the dip following the recent selloff, there will inevitably be a cohort of people who didn’t like how events played out last week. They might be looking to rejig portfolios to spread risks and seek more stability should there be another market pullback. That could be the tailwind that helps the FTSE 100 to hit the 11,000 level, alongside a broader improvement in market sentiment.
There were broad-based gains on Wednesday, with miners and financials leading the charge on the UK stock markets. Futures prices imply a decent session on Wall Street when US markets open later. However, it was telling that gold also nudged higher which suggests there is still an element of caution alongside opportunistic and selective buying of equities.
ITV
ITV has no problem showing reruns, but its third-quarter update won’t be one it wants to repeat. Both its broadcasting and studios arms suffered from a decline in sales, creating the equivalent of a show no one wants to watch.
Advertising demand has weakened which often happens when companies worry about the economic backdrop.
The prospect of a new cost of living crisis might have encouraged companies to dial down advertising spend, for fear that consumers might not be feeling flush enough to buy their products and services.
It also doesn’t help that all the big streaming platforms like Netflix, Amazon Prime Video and Disney Plus are now full of advertisements, meaning ITV is competing against these giants for a slice of the advertising pie.
ITV’s sale of its media and entertainment arm, essentially the broadcasting and advertising business, can’t come soon enough. The deal will leave ITV with its production arm, which has traditionally been a reliable earner. The third quarter was an exception, although timing was largely to blame.
Several projects and licensing deals are weighted towards the fourth quarter, meaning Studios’ performance looked weaker because of when revenue is recognised.
The picture is on the blink for ITV, but the company seems confident of bouncing back.
Taylor Wimpey
It’s a bad time to be a housebuilder with the prospect of interest rates going up, mortgage affordability deteriorating, and consumers feeling the pinch from higher energy costs. The housing market is suffering and that is translating into weak demand for new builds.
Taylor Wimpey is caught up in a perfect storm. That’s led to a warning that full-year operating profit will come in at the bottom end of the consensus forecast, causing the share price to pull back.
The government’s Your First Home initiative doesn’t kick into gear until April, raising the risk that some people will delay property purchases in hope of participating in this scheme. That creates even more headwinds for the housebuilding sector. At least Taylor Wimpey is in a financially strong position to ride out the storm.
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...