FTSE lower as Alphabet and Meta prompt a US tech sell-off, Standard Chartered slammed, Pizza Express in for Wagamama owner, WPP warns and Unilever underwhelms

“The fall-out from a disappointing performance from Google-owner Alphabet’s cloud division continues as a wider tech sell-off feeds into the performance of European markets on Thursday,” says AJ Bell Head of Financial Analysis Danni Hewson.

“When you consider the negative reaction to Meta Platforms’ warning of weaker ad spend, despite, like Alphabet, posting better-than-expected earnings, then hopes big US tech might continue to drag markets higher on its back are starting to look increasingly forlorn.

“It is notable that, thanks to their extremely strong run, beating earnings expectations is not, in itself, proving enough to support share prices. Investors are looking beyond the headlines to see just how healthy the outlook really is for these businesses.”

Standard Chartered

“A big warning from emerging markets bank Standard Chartered contributed to weakness in the FTSE 100 – the company has been hit hard by the problems in the Chinese real estate market. The company looks increasingly vulnerable to a takeover, with First Abu Dhabi Bank freed from UK takeover restrictions that were preventing it from returning with a bid.

“If it does choose to have another crack at Standard Chartered then it may well find it can do so at a cheaper price.”

Pizza Express / The Restaurant Group

“The prospect of a bidding war for The Restaurant Group has emerged with news Pizza Express, currently controlled by a group of debt funds, is considering an approach for the Wagamama owner.

“The idea of combining two of the UK’s most popular casual dining chains has logic to it and may prompt Pizza Express to push hard to rival private equity firm Apollo’s existing £500 million bid, particularly given former Wagamama chair Allan Leighton now occupies the same position at Pizza Express.”

WPP

“When advertisers are in trouble, it is typically not a good sign for the economy. The ad space is seen as a good bellwether because companies will increase spending on ads when they are feeling positive and scale back during tougher times. WPP has significant scale, breadth and geographic reach, making this even more relevant.

“Significantly, US tech clients are proving more cautious and there has also been a slowdown in spending in China to contend with.

“The company is rejigging the business and plans a big investor day in January to outline its plans to drive growth.

“Mark Read did a decent job of steadying the ship at WPP since his appointment in 2018 but with the share price faltering, he is under pressure to start delivering despite the difficult backdrop.”

Unilever

“Recently appointed Unilever CEO Hein Schumacher ruled out any big dramatic M&A activity as he outlined a strategy which included a management overhaul and increasing focus on 30 big brands such as Hellmann’s and Dove which account for 70% of turnover.

“The announced sale of Dollar Shave Club suggests the company is moving away from buying emerging brands – which have tended to look more like fads than anything likely to endure for the long term – at a premium.

“All of this seems pretty sensible, but it is not enough to get the market excited, particularly when combined with the mixed third quarter numbers.

“While the volume declines Unilever is experiencing are not as significant as some of its peer group there is still evidence of the big problem facing the consumer branded goods firms as people switch into cheaper unbranded alternatives. Notably this trend is significantly more pronounced in Europe – where supermarket-own products are more readily available.”

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