Market report: Lower oil prices weigh on Footsie as better GDP data is shrugged off
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “The FTSE 100 is on the back foot in early trade, as lower crude prices weigh on energy stocks. The better-than-expected growth snapshot also appears to have underwhelmed investors.
UK GDP data may have surprised on the upside, but the upswing in activity risks fizzling out given the uncertainty on the horizon. There was a surge in business investment during the quarter, after a fall at the end of last year. With the threat of tariffs hovering which looked set to push up prices, it looks like there was a spell of buying of machinery and IT. Higher payroll costs came into force in April which looks set to see businesses reining in spending this quarter. It was a brighter picture for consumer facing services overall, with output rising 0.9% in the three months to March. But it’s still been tough for the food and beverage trade with activity shrinking slightly. However, with the sun shining since April, and pay growth still beating inflation, there will be hopes that the feel-good factor may be re-emerging for retail and hospitality in the second quarter.
The growth headline is still encouraging for Chancellor Rachel Reeves and comes hot on the heels of the trade deal agreed with the US, to avoid the most punitive extra duties. But with 10% tariffs imposed on most British imports into the US, and uncertainty about how deals will land elsewhere in the world, there’s still going to be a period of adjustment ahead for the UK economy.
Falling oil prices have put pressure on listed energy giants, as concerns about oversupply in the market swirl. Brent Crude has ticked down by more than 3% to trade below $64 a barrel. Just as traders were processing data that showed a big surge in US crude stockpiles, the potential for a US-Iran deal is increasing forecasts of a glut in global oil supplies. BP has fallen by more than 4% and Shell is down 2.7% in early trade as lower oil prices weigh on their valuations.
Investors don’t appear very content with ITV’s latest results, which showed that first quarter revenue fell 1% to £875 million. Shares are down 1.5% in early trade, with investors likely to be homing in on the 3% fall in revenue from the core Media and Entertainment business. However, as my colleague Aarin Chiekrie explains, there were some bright spots in the results.”
Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “ITV put in a solid showing over the first quarter, with strong sales of content to the likes of Netflix and Amazon Prime Video helping to offset a tough comparable period for advertising revenue. The Studios business returned to growth after shrugging off the after-effects of the US writers’ and actors’ strike, and it’s expecting to grow revenue ahead of the broader content market, with performance weighted to the second half.
The Media & Entertainment (M&E) side of the business saw revenues decline slightly, with comparable numbers set to get worse next quarter as last year’s figures benefited massively from the men’s Euro’s 2024. Compared to 2023, first-half total advertising revenues are expected to be broadly flat. Within M&E, ITVX continued its stellar run, with an uptick in monthly active users and total streaming hours growing at double-digit rates. With more eyeballs on ITV’s screens, advertising revenues are flowing in, and the group remains hopeful of delivering at least £750mn on digital revenue by 2026.”