Chinese stocks now up year-to-date, while ITV slumps on advertising warning

“It is very encouraging to see that China’s SSE index has now recovered all of its losses this year,” says Russ Mould, Investment Director at AJ Bell.

“In the US, the Nasdaq 100 is also showing gains year-to-date (2.5%) although pre-market indicative prices on Thursday suggest the US index could open 1.8% lower which would eradicate some of those gains.

“The FTSE 100 started the day in positive territory but soon slipped back to a 0.6% decline at 6,776. European markets did the same.

“Decisive action such as shutting schools in Italy, further travel restrictions and mandatory quarantines provide some hope to investors that the health incident won’t get out of control.

“However, investors have been expecting bad news and plenty is now being delivered by companies.

“What remains unknown is the severity of the disruption to corporate earnings and how long it will last, so you cannot rule out another global markets sell-off if it looks like businesses are struggling and consumer spending is deteriorating.

“For now, commodity markets are showing some signs of optimism with the oil price rising 0.6% to $51.42 per barrel and the three-month copper price rising 0.6% to $5,715 per tonne."

ITV

“It is becoming a lot easier to understand why share prices have slumped this year as more corporates attempt to quantify the impact of the coronavirus on trading.

“ITV is the latest business to suffer as a sharp drop in demand for flying has seen travel companies slash advertising activity. The media group warns that total advertising revenue will be down 10% in April.

“Travel companies won’t be the only sector cutting their marketing activity. If more people are forced to work from home, either because of decisions made by their employers or their children’s schools are closed, then it is feasible to suggest a sharp drop in consumer spending in the UK.

“Even though being at home could lead to people watching more TV, many brands will suffer from lower footfall on the high street or in retail parks, and the brand owners will be the ones reassessing their advertising expenditure. What’s the point in advertising to a TV audience if there is a lower propensity to spend?

“Furthermore, any disruption to the Euro 2020 championships could compound ITV’s advertising problems. We’re already seeing events cancelled to avoid having large crowds of people in one place and Euro 2020 is only three months away. Sporting events are incredibly important drivers of advertising revenue for ITV and it is scheduled to show many of the Euro 2020 matches.

“Of course the situation may turn out to be far less severe, yet for now markets remain very nervous and investors are thinking about worst case scenarios.”

These articles are for information purposes only and are not a personal recommendation or advice.