Daily market update: tech gloom weighs on Asia and Europe, NatWest, ITV

A gloomy session on Wall Street on Thursday put investors in a grumpy mood at the end of the trading week.

Association with AI has gone from party to peril as investors reappraise what the technology means for companies.

Some are concerned about excessive levels of spending and others fear AI will disrupt multiple industries. It all adds up to a cocktail of worries and that’s bad for market sentiment more broadly.

The FTSE 100 bucked the sell-off across Europe and Asia on Friday thanks to strength in industrials, banks and miners.

NatWest

NatWest’s marginally better than expected headline numbers and upgraded guidance for returns have been helped by growth in its private banking and wealth division.

Both NatWest and Lloyds have been expanding their interests to reduce their exposure to movements in interest rates, which have a major influence on what they charge to lend money. Bringing in fee-paying affluent customers should, in theory, make profit more consistent and reliable.

NatWest’s recent acquisition in the wealth management space follows on from the capture of Sainsbury’s banking business and mortgage business from Metro Bank. However, it does not bear any real comparison to the £49 billion capture of ABN Amro on the cusp of the financial crisis. This contributed to well over a decade of public ownership – something NatWest only escaped last year.

Full privatisation and a relaxation of the rules on bankers’ pay allow NatWest more flexibility when it comes to remuneration and its decision to hike bonuses and executive pay may draw some attention.

For shareholders, there is unlikely to be significant disquiet given NatWest’s generosity with share buybacks and dividends and the recent strong showing for the share price.

ITV

Dan Coatsworth, Head of Markets at AJ Bell, comments:

The market is waiting with bated breath for an update on Sky’s desire to buy ITV’s broadcast and streaming operations. Reports suggest talks have slowed, implying this is far from a done deal.

The approach last November triggered a big jump in ITV’s share price, and the stock has stayed firm ever since. The latest twist to the story has triggered a share price wobble, but the decline is only minor which implies that investors are still hopeful a deal can be done.

ITV last year revealed that Sky has proposed a deal worth £1.6 billion, but it didn’t say whether that price was the right one to get it over the line. It’s possible that ITV’s board is pushing for more, hence why talks have slowed.

For years, analysts have said ITV was worth considerably more broken up, with the studios business being significantly undervalued by the market.

ITV’s shares have traded on a low valuation as the market has worried about the long-term future of linear TV viewing and unpredictable advertising income.

The Studios production arm has sat within the group as a hidden gem and splitting the company in two, such as via selling the broadcast bit to Comcast, could in theory trigger a re-rating in ITV’s stock.

The investment case would change as elements of uncertainty linked to broadcasting and advertising would be removed. In doing so, the remaining bit of ITV could become an instant takeover target for someone looking to get their hands on high-quality production capabilities. Content is king in today’s streaming world.