Markets weak after US tech sell-off, Centrica profit ‘normalises’, ITV’s Euros boost wasn’t enough, Nissan slumps and Anglo American announces further UK mine write-down

“Wednesday’s big slump in tech stocks saw US indices endure their worst session since 2022,” says AJ Bell Investment Analyst Dan Coatsworth.

“The weakness bled into Asian trading sessions on Thursday and prompted a slow start in Europe too, although the FTSE 100’s limited exposure to technology likely spared it from larger losses.

“While a $1 trillion sell-off makes for a neat headline it is worth putting last night’s weakness into perspective given indices were recently trading at record highs and there were big moves in some enormous companies. Whether this is a necessary correction to remove some froth from the market or something more dramatic will depend on forthcoming earnings from the likes of Microsoft, Meta, Apple and Amazon next week as well as AI-star Nvidia at the end of August.

“The unpredictable US presidential election provides a dose of uncertainty which investors always hate, but that alone won’t have been the cause of the tech sell-off. Instead, it’s been bubbling away for a while and disappointment at Tesla and Alphabet’s figures seemed to open the flood gates.

“Elsewhere, the Paris Olympics is in its initial stages but already Air France-KLM is flagging a bigger than expected hit to tourism as people avoid the French capital amid the event. It’s no wonder cities are becoming reluctant to put themselves through the mill for these expensive sporting summits.”

Centrica

“Results from British Gas owner Centrica are a reminder of just how cyclical its business is. While other suppliers were squeezed by the energy crisis, Centrica’s wholesale operation meant it was a direct beneficiary of an increase in oil, gas and electricity prices.

“Therefore, a halving of profit as prices come down shouldn’t come as a major surprise given what Centrica rather euphemistically calls a ‘normalised’ market. A return to normality is not a message to enthuse shareholders given that pre-energy crisis Centrica’s shares had struggled as customer numbers in its retail operation dwindled and its wholesale arm struggled.

“One thing the company has in its favour thanks to the recent bumper period is plenty of cash and this should allow it to continue funding share buybacks, notably announcing a £200 million extension to its current programme.

“Centrica is also investing in new projects and technologies, but investors will want to see evidence of this paying off before it gives the company credit.”

ITV

“ITV’s results almost scored a winning goal thanks to a big advertising boost from Euro 2024, Love Island attracting more eyeballs and must-watch dramas boosting viewer figures. However, the broadcaster is still feeling the hangover of Hollywood strikes and there are other contract and margin issues which dampen the near-term outlook.

“Despite some headwinds, it does feel as if ITV is finally getting its act together. The ITVX streaming platform is proving to be a bigger hit than some people previously expected. This growing popularity makes ITV more appealing to advertisers looking to target certain people.

“Whereas advertisers might have a broad idea who would watch a specific programme on linear TV, streaming platform providers can offer much more specific data on who is logged on and watching certain shows or films. This extra information is exactly what advertisers want, as it means they can better target individuals and not waste money on blanket promotions.

“The Euros were a one-off boost to advertising, but the prospect of interest rate cuts leading to greater consumer spending could see more companies spend on promotions. That suggests brighter days ahead for ITV’s advertising income.

“The Studios arm continues to be an undervalued part of the business and demand remains high from broadcasters and streaming platforms around the world for decent content.

“ITV has a strategy to improve monetisation of its assets by licencing content internationally, as well as feed its own streaming platform and linear TV channels with its own productions. While there have been a few bumps in the road, the strategy makes sense and the focus is now about perfect execution to show that ITV is fit for the modern age of media. Progress so far looks promising.”

Nissan

“Japanese carmaker Nissan served up an absolute shocker of a first-quarter statement with profit almost completely wiped out.

“The company has been forced into deep discounting in the US market which doesn’t say much for the strength of the brand.

“Nissan is already facing woes in another core market in China and by slashing its outlook it has sent a very clear signal on the trajectory for the group.”

Anglo American

“Anyone hoping for the near-term revival of the UK mining industry has had their dreams shattered by Anglo American.

“Sirius Minerals’ fertiliser mine in Yorkshire was meant to have been a world-class project, creating thousands of jobs and showing that the UK still had the skills to be a player in the global commodities market.

“Anglo American bought Sirius Minerals in 2020, lifting expectations for the fertiliser mine after gaining a new owner with deep pockets. Sadly, progress has been incredibly slow and it’s been put on the back burner after the new parent company has more pressing things to deal with.

“Anglo American has now announced a further $1.6 billion write-down on the project, which follows a $1.7 billion charge in February on development schedule changes and budget recalculations.

“The mining development is still happening; it just won’t be finished for at least another six years. That means the UK mining industry’s big comeback is on ice for now.”

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