Snap warning to derail US stock market, windfall tax threat for renewable energy firms and SSP back in fashion

“Snap, crackle, pop, watch as shares drop in companies reliant on advertising income. A warning by Snapchat’s owner has sent ripples across the market for social media companies, triggering fears that advertising spend has peaked for now,” says Russ Mould, Investment Director at AJ Bell.

“We’ve already seen cracks in this market when Alphabet last month reported weaker than expected advertising revenue for YouTube.

“With Snap following suit, it’s understandable why investors are fearful. Advertising spend typically tracks economic activity. When times are good, companies are confident to spend heavily to promote their products and services. When the outlook is gloomier, advertising spend is pared back. After all, why splash the cash on promotions if fewer people are going to open their wallets?

“Snap’s shares fell 31% in after-hours trading, with Pinterest down nearly 12%, Meta Platforms falling 7% and Alphabet down nearly 4%. These movements will inevitably see the US markets have a bad day when trading kicks off later today. That in turn will put investors in a bad mood and create more storm clouds just at the point when many were hoping the market slump was close to bottoming out.”

UK Market

“The UK market fell nearly 1% in early trading on Tuesday, dragged down by SSE which plummeted on reports that the Government might impose a windfall tax on big profits from electricity generators including wind farm operators.

“The Government wants to raise money to help households hit by a sharp rise in energy bills. While it is right that some support should be given to those most in need during these difficult times, the way in which new funds are raised means the Government runs the risk that energy companies slow down investment in new green projects which could make it harder for the country to hit its net zero emissions targets.

“A 2% drop in Hikma Pharmaceuticals is the market’s way of saying it is disappointed that Siggi Olafsson is stepping down as CEO. Shares in the group have risen by 84% since his appointment in February 2018, making Hikma the seventh best performing FTSE 100 stock during that period.

“It’s been a long time since anyone upgraded earnings forecasts for SSP, the railway and airport food seller seriously derailed by the pandemic. However, signs of business recovery have gone down well with investors, triggering a 7% hike in the share price following half-year results. Some analysts have signalled they will now nudge up their earnings estimates. Interestingly, Restaurant Group also said its transport hub concessions were recovering fast.”

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