Fed and US tech help lift FTSE 100, BT could kick sport into touch, and Unilever beats sales growth goal

“Continuing strong numbers out of the US technology sector, together with the US Federal Reserve’s latest attempts to allay fears of any imminent rate rise, laid the foundations for the FTSE 100 to mount its latest assault on the 7,000 level,” says AJ Bell Investment Director Russ Mould.

Apple announced a bumper share buyback plan and Facebook was boosted by advertising revenue.

“On a busy day for corporate news in the UK, oil major Shell eked out modest gains suggesting investors had already largely priced its return to profit off the back of higher oil prices.

“Consumer goods firm Unilever was more buoyant having beaten expectations as people continued to reach for its brands during lockdown – perhaps tucking into some Ben and Jerry’s ice cream for comfort eating. The strong response to its first quarter update contrasted sharply with the raspberries given to its rival Reckitt yesterday.”

BT

“Maybe BT doesn’t think the breakaway European Super League is as dead as it appears to be given the company has confirmed speculation it is considering a sale of its BT Sport arm.

“While it shows Premier League games, the sports broadcaster’s crown jewels are its exclusive rights to the existing UEFA-backed competitions including the Champions League – a product which would be massively devalued if the top clubs followed through on a threat to forge out on their own.

“In reality it seems BT will only be opting for a partial sale of the division, with Amazon and Disney as well as a British broadcaster believed to be in the frame.

“Bidding for sports rights is an expensive and unpredictable business – securing them can be a big pull for subscribers and advertisers but it involves a big outlay and there is always a risk a rival could gazump you at the last moment – a trick BT itself has pulled in the past.

“Plus at the moment the world of sports and sports rights is in a flux thanks to the pandemic – it’s a very different world from the one in which BT launched as a challenger to Sky nearly a decade ago.

“By selling a bit of the business, and reducing the amount it spends on sport, BT could generate funds to help meet the massive bill it faces for investing in broadband infrastructure.

“After all, most customers would take a more reliable internet service over slightly cheaper access to watching the footy.”

Unilever

“Slow and steady wins the race, so the adage goes, and Unilever certainly fits the bill. Its goal of growing sales by 3% to 5% a year won’t excite a lot of people, given how there are technology companies adding one or even two zeros to the end of those figures for their annual sales progression. However, its resilience and stamina are often forgotten strengths.

“A year or two ago, the market was questioning whether Unilever could grow at all, yet now it is beating its sales growth target.

“Amid expectations of inflation accelerating this year, Unilever’s pricing power strengths will be put to the test.

“It has flagged additional supply chain costs and raw material inflation, which is putting pressure on margins, so the solution would be to pass on those costs to the end customer.

“Of the 5.7% sales growth in the first quarter, 1% can be attributed to higher selling prices and the rest greater sales volumes, so it is already displaying pricing power, particularly in its food and refreshment products.”

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


The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.