Shares find it harder to jump on strong quarterly results and ITV is back on form (for now)

“It says a lot when a big-name stock like Apple doesn’t see a share price jump on better-than-expected quarterly earnings,” says Danni Hewson, Financial Analyst at AJ Bell.

“The second quarter earnings season is proving to be a mixed bag for markets, with investors looking past many impressive top line figures and digging deeper into the numbers to find anything they can to worry about.

“Microsoft also smashed expectations, yet its shares barely moved in after-hours trading as good headline news on earnings was offset by concerns about a slowdown in the rate of growth for its Azure cloud computing operations.

“The FTSE 100 traded flat just under 7,000 as UK markets opened on Wednesday, with strength among UK-facing banks offset by weakness in miners and pharma stocks.

“Barclays topped the FTSE risers after its quarterly numbers sounded the right notes with news on dividends, share buybacks and a greater than expected release of provisions set aside to cover any potential loan losses relating to Covid.

“Hong Kong’s Hang Seng index bounced back 1.4% following recent weakness triggered by concerns over tightening regulatory interference from China in various sectors.

“All eyes will be on the US Federal Reserve which is in the middle of its two-day policy meeting. As always, investors will want to know the central bank’s latest view on the outlook for the US economy and whether it is time to tinker with policy support measures.

“The spread of the Delta virus variant in recent weeks and months could give the Fed reason to make no changes to its policy, but any sign of taking a more forward-looking view and wanting to taper bond purchases could cause ripples across global markets.”

ITV

“A bullish set of results from ITV shouldn’t come as a surprise. The reopening of the economy is a natural driver for companies to increase advertising and so ITV’s associated revenue has grown by a decent rate.

“It’s also helped that the company’s blockbuster show Love Island is back on the nation’s screens, which means another rush by advertisers to bag a slot in the commercial breaks. And let’s not forget the Euro football championship which brought another one-off boost to viewer figures and therefore advertising demand.

“This is fine now, but ITV’s position longer term remains uncertain. There is structural shift of advertising away from TV and towards online channels.

“ITV may have done well in the past year thanks to people being at home during the pandemic and who, having exhausted everything on Netflix, found themselves watching traditional TV channels again.

“However, there is a real risk that was a one-off event, and streaming programmes and films on-demand will rule once more. That places even more pressure on ITV to come up with must-watch shows. As such, it will have to plough significant amounts of money into the studios arm to enrichen its content.

“Advertising regulations continue to tighten, with a junk food ban pre-9pm on TV from 2023 likely to have a major impact on ITV’s earnings, given how that market is a key source of advertising income.

“The Britbox joint venture with the BBC may be posting double digit subscriber growth numbers, but these are from a very low base. Streaming platforms are a scale game, and it is hard to consider Britbox as anything but a tiny player.”

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