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“The FTSE 100 was treading water on Wednesday, floating around the 5,851 level as gains in the healthcare, telecoms and utilities sectors were offset by weakness in energy, technology and consumer cyclicals,” says Russ Mould, Investment Director at AJ Bell.
“Investors seemed relatively cautious following April’s sharp rebound in global markets, perhaps weighed down by renewed tensions between the US and China and ongoing uncertainty about exactly when the coronavirus crisis will end. A lot of hope is already priced into stocks and there is a growing feeling that earnings forecasts are being too optimistic, thus dampening some of the enthusiasm we’ve recently seen on the markets.
“Brent Crude also held firm at just over $31 a barrel, having also seen a big comeback since slumping in value during late April. The market is hoping that oil demand will start to recover as lockdowns ease and more companies get back to work."
Ocado
“The nation has formed new habits during lockdown, particularly in how households shop for food. The big weekly shop for food is back as individuals are encouraged not to venture out to the shops unless for essentials. That’s music to the ears of Ocado which has seen a sharp increase in the average order size.
“This news has also taken its share price to a new record high of £17.16, meaning its stock has increased in value by 570% in the past two and a half years.
“Theoretically being at home should have encouraged more people to try food shopping online for the first time, however Ocado took the decision in March not to take delivery orders from new customers because operations were already at full capacity.
“Ocado wants to be seen as a technology company helping other grocery providers to build online fulfilment networks. The past few months will act as a showcase to prospective third party retailers for how its processes coped with extreme circumstances.
“From the consumer’s perspective Ocado may have disappointed because it couldn’t cope with demand, even having to temporarily take down its website. However, in retrospect this was only for a short period and Ocado has managed to bounce back.
“The importance of internet-based orders during the pandemic should have convinced other grocers around the world of the need to have top-notch infrastructure to fulfil online food orders. It should have also removed any doubts among Ocado’s existing customers about their development plans – which is important given chatter last year that its relationship with US customer Kroger wasn’t great.”
ITV
“The 42% drop in advertising for April reported by ITV implies lockdown has been very tough for the economy.
“Advertising is a good barometer for economic conditions because companies will increase spending on ads when they are feeling positive and scale back when times are tough – and such a huge decline in expenditure shows things are very tough indeed out there.
“The outlook picture is fuzzy and a collapse in ad revenue is painful for ITV in the short term, as is the widespread shut down across its TV production arm but there are more positive long-term portents in today’s update.
“The company has moved to shore up its balance sheet and reduce costs and looks to have a reasonable amount of breathing space on that front.
“In addition, the network is getting more eyeballs across its different platforms – including live TV and, notably, online streaming which was up a remarkable 75% in the first quarter.
“Stuck inside at night thanks to lockdown, people are hungry for content to keep them occupied and provide an escape from difficult circumstances in their day-to-day lives.
“With classic shows popular as comfort viewing, it’s no surprise to see good demand for ITV’s library of existing content and more people signing up to its Britbox subscription service venture with the BBC.
“As the economy moves out of hibernation, businesses will want to re-engage with consumers and the apparent resurgence of television in the crisis makes it an obvious way of doing so.
“Creating new ads might be more complicated in a world of social distancing but ITV is preparing the ground by working with agencies and potential advertisers.
“TV is a potential safer medium than online advertising where there is a greater risk of reputational damage from ads being displayed alongside controversial or offensive content.”
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