FTSE lower after Covid resurgence in China, Bob Iger returns as Disney CEO and Virgin Money unveils big dividend and buyback

“The FTSE 100 started lower on Monday after Covid made its latest unwanted comeback in China,” says AJ Bell Investment Director Russ Mould.

“The market had been pinning hopes on a Chinese reopening to help ease global supply chain problems and kickstart growth in the world’s second largest economy.

“However, renewed outbreaks of Covid have seen some restrictions return and helped dampen sentiment, with oil prices also lower.

“Once again, the FTSE 100 is finding the 7,400 mark a difficult wall to climb over as nagging worries over the economic outlook help to drag it lower, with its heavy weighting to commodities stocks not helping given this sector is particularly sensitive to Chinese growth fluctuations.

“An iffy outlook from food service chain Compass alongside the full year results didn’t help matters much. The numbers themselves were worthy of a silver platter but guidance for the first half of the current financial year to do the heavy lifting on annual growth gave the market some indigestion.”

Disney

“With its share price close to the lows of the 2020 Covid market crash, it’s no wonder that Disney has parted ways with Bob Chapek as chief executive.

“Admittedly, his appointment in February 2020 came only weeks before Covid rocked the world so his early days in the role were defined by trying to cope with a global crisis.

“The real dissatisfaction with Chapek’s performance lies with the decisions made in the aftermath of the pandemic.

“Chapek has gone against all the historic values that defined Disney. The company creates ‘magical experiences’ for individuals and families, be it through cartoons, films or theme parks. In contrast, Chapek has created poor experiences for staff and customers.

“He has riled those working for the company by getting rid of well-respected TV content executive Peter Rice and deciding to move some staff from California to Disney, causing bad morale and a lack of trust. Customers have had to suffer large price hikes and a big rise in stoppages to rides in its theme parks.

“The latest set of quarterly results were the final straw for Chapek. They fell short of expectations for sales and profits, with both the park and media divisions missing estimates.

“Can the return of Bob Iger make a difference to Disney? He’s seen as a safe pair of hands and someone who should be able to steady the ship.

“When he stood down as CEO in 2020, one of the things Iger regretted was the decision to release so many Star Wars films in a short period, saying that less is more. Perhaps he might now focus on quality of experience, not quantity, and give Disney a tighter focus on getting things right rather than churning anything out. That could apply to the theme park initiatives as well as its media operations.”

Virgin Money

“Banking outfit Virgin Money offered a reminder that higher interest rates aren’t necessarily bad news for everyone as it announced big cash returns to shareholders off the back of a robust set of results.

“Combined with a beaten down valuation and it is no surprise shares in Virgin Money were in heavy demand today.

“The better-than-expected dividend and buyback from Virgin Money are good news on their own but are also crucial for what they say about management’s confidence in the outlook for the business.

“Virgin Money has significant exposure to the mortgage market, although looking at its loan book it seems to have done a decent job of managing its risks. So far impairments are coming in lower than expected and Virgin Money is sitting on a comfortable cash buffer, way in excess of regulatory thresholds.”

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