FTSE flat as US tech disappoints, Made on the brink, Barclays structured product debacle drags on profit and Reckitt sales slow

“The FTSE 100 started off the day in steady fashion despite the negative backdrop provided by weak quarterly numbers from the US tech sector,” says AJ Bell Head of Investment Analysis Laith Khalaf.

“This is a reminder of the UK flagship index’s greater focus on the old world economy – something which has held it back a bit in the past but has been more of a virtue in 2022. Mining stocks were among the gainers this morning.

“The pressures on consumer-facing stocks are brought into sharp relief by the collapse of a rescue deal for online sofa seller Made.com, which has left the company teetering on the brink.”

Alphabet & Microsoft

“All good things must come to an end but it is still a jolt to see advertising revenue on Google-owner Alphabet’s Youtube platform fall for the first time on record. While bad news for its parent company, the reversal in fortunes also says something less than encouraging about the state of the economy and is a negative omen for the wider digital advertising space.

“The results of the big technology firms were seen as a key determining factor in market sentiment going into the US third quarter reporting season and both Microsoft and Alphabet have given investors reason to worry.

“Microsoft may have topped forecasts but that’s only because expectations were set pretty low, and this is the weakest growth since 2018. Meanwhile Alphabet reported its slowest growth for more than a decade, excepting the initial stage of the pandemic.

“It was notable to see Microsoft talking about a slowdown in the previously buoyant and fast-growing cloud computing space and investors will be watching closely to see if this negative commentary is repeated by Amazon, increasingly reliant on its Amazon Web Services arm, when it reports later this week.”

Barclays

“Barclays continues to wear the recent US structured products trading debacle like a heavy weight around its neck and this drags down an otherwise fairly positive set of third quarter numbers.

“The economic slowdown and stock market turmoil also means the investment banking arm is struggling as big corporate deals are on the backburner for the time being.

“Volatility isn’t bad news for every part of the business and strong bond trading has helped the company post profit notably ahead of forecasts, while higher interest rates are supportive, just as they are with other banks.

“However, the flipside of this is that Barclays is having to set aside more funds to cover a possible increase in bad debts as people and businesses find themselves getting into difficulty as the cost of borrowing goes up.”

Reckitt Benckiser

“Slowing quarterly sales growth at consumer goods outfit Reckitt Benckiser, and an absolute decline in the volume of goods sold, highlighted how the big pressures on household budgets are having an impact.

“The company also offered little comfort for shoppers facing higher prices on the shelves as it pledged to continue passing on higher costs. From Reckitt’s perspective this at least demonstrates that its brands retain some pricing power.”

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