Consumer activity shifts from gaming to cinema, FTSE up, Europe boosted by M&A, and BHP exits oil and gas

“Life is getting harder for gaming companies as consumers find plenty of reasons to get out of the house post-lockdown,” says Russ Mould, Investment Director at AJ Bell.

“After seeing strong demand for games during the pandemic as people found ways to fight off the boredom of being stuck indoors, it was inevitable there would be some easing of demand once life started to return to normal.

“Unfortunately, gaming companies have been eager to ride the pandemic-inspired momentum by scrambling to release new titles and so the marketplace has been very crowded just at the time when gamers found they had plenty of new alternatives to keep them busy.

“Frontier Developments has disappointed with its latest product which in turn has triggered a 28% slump in its share price. The weaker than expected sales of Jurassic World Evolution 2 muddies Frontier’s reputation of delivering back-to-back blockbuster hits.

“On the other side of the equation is Everyman Media which was a lockdown loser and now a freedom winner. Even though we’ve all devoured so many films and TV series at home during the pandemic, the cinema remains an appealing leisure activity, and it seems we’re all flocking back to the silver screen.

“Everyman’s shares jumped 8% after it said more people have been visiting its posh cinemas than expected, giving a nice boost to earnings. Cinema demand is highly dependent on the quality of the film slate and there have been quite a few popular titles released in recent months to help put bums on seats.

“No Time To Die, Eternals, Dune, Venom 2 and the latest part of the Ghostbusters franchise have all been popular, giving a tailwind to the cinema industry.

“Elsewhere on the UK market, the FTSE 100 rose 0.4% to 7,255 thanks to strength among banks, miners and telecoms stocks, the latter sector helped by a private equity takeover approach for Milan-listed Telecom Italia.

“While most of the big European markets were in positive territory, Asia fared less well with a 2% decline in India’s BSE Sensex index, dragged down by energy and consumer cyclical stocks.”

BHP

“BHP is serious about the threat posed by mounting environmental pressures. The mooted deal to merge its oil and gas assets with Woodside, which was confirmed today, enables it to be clear of assets at the sharp end of the so-called energy transition.

“While the pace of change remains open to question, the direction of travel for fossil fuels looks fairly clear.

“This deal will allow BHP investors to remain exposed to the petroleum industry should they wish – with shares in the new combined entity distributed to shareholders – but equally if they want pure mining exposure they can sell up and move on.

“In order to pursue a move to cleaner forms of energy BHP clearly feels more scale is needed than its oil division had, and this is something the deal with Woodside aims to solve. However, Woodside’s decision to greenlight a new LNG terminal in Australia suggests it doesn’t see hydrocarbon demand disappearing overnight.

“BHP should now look more appealing from an ESG perspective with the metals it digs out of the ground fundamental to building the electric vehicle and renewables infrastructure required for the world to wean itself off oil, gas and coal.

“However, there will still be pressures to reduce the carbon footprint of its mining operations and this is likely to be an area of focus in terms of investment as BHP moves into its brave new future.”

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