News Column

MARKET COMMENT: ITV Stands Out From UK Stock Slide

July 17, 2014

Jon Darby

LONDON (Alliance News) - The main UK stock indices are trading a little lower Thursday amid a dearth of domestic economic data and as investors exercise caution following the introduction of a new round of sanctions against Russia by the US and the EU.

It's perhaps not surprising that the FTSE 100 opened with a negative bias, given the lack of UK data drivers and the fact that the leading index recorded its best day in more than four months on Wednesday, boosted by positive Chinese data and global merger and acquisition activity. While overall sentiment is weighted more to the downside Thursday, M&A talk continues to drive some big individual stock movers.

By mid-morning Thursday, the FTSE 100 is down 0.4% at 6,760.41, the FTSE 250 down 0.4% at 15,538.57, and the AIM All-Share down 0.3% at 773.905.

ITV leads the FTSE 100 gainers, up a remarkable 8.7% on speculation that it is about the become the latest blue-chip takeover target after fellow broadcaster British Sky Broadcasting said it has sold its 6.4% interest in ITV to John Malone'sLiberty Global PLC. The sale was made at 185 pence per share, a small premium to ITV's closing price Wednesday of 182.95p. ITV shares are currently quoted at 199.80p.

While Liberty Global has said it doesn't intent to make an offer to acquire ITV, the news has ignited speculation of ITV as a potential target, especially given the increased activity in the media sector recently, with news on Wednesday of an offer for US media group Time Warner by Rupert Murdoch's 21st Century Fox.

"We do not expect an immediate bid by Liberty for ITV," said Liberum Capital analyst Ian Whittaker. "However, it is hard to read this move as anything other than an indication of its longer-term intentions."

Meggitt, the engineering group that closed up almost 10% after becoming Wednesday's M&A speculation focus, is retracing some of those gains in the absence of any further news Thursday, currently down 1.7%.

Sports Direct International is down 1.6%, despite releasing strong full-year results that showed a 24% rise in year-on-year revenue, and a 16% rise in year-on-year profit. While those numbers were broadly in-line with expectations, analysts have highlighted that, at GBP212 million, year end net debt was significantly higher than expected. Liberum Capital had forecast a debt level of GBP41.4 million.

Eurozone inflation data was the main economic focus of the morning, but passed without much fanfare as the final numbers remained unchanged from the initial estimate. In June, consumer prices rose by 0.5% year-on-year, while core prices, which exclude volatile items such as food and energy, rose by 0.8%.

Major European stock markets are also trading lower, with the French CAC 40 down 0.4% and the German DAX down 0.3%.

A fresh round of sanctions against Russia, designed to punish President Vladimir Putin's government for its actions in Ukraine, appear to be having a bigger impact than any economic data Thursday, not least because of the increased rhetoric that comes with them.

Putin has verbally hit back against the sanctions, labelling them as an "aggressive form of foreign policy". The Russian president has also called the sanctions "feeble", and said that they will only serve to solidify anti-American sentiment within Russia.

Attention will soon switch to the US Thursday, where second-quarter corporate earnings will keep coming. There are also US housing starts and initial jobless claims data at 1330 BST, followed by the Philadelphia Fed manufacturing survey at 1300 BST.

Futures trading currently indicates that US stocks will follow the UK and Europe lower, with the DJIA pointing 0.2% lower, and the S&P 500 pointing 0.3% lower.

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Source: Alliance News

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