FTSE 100 Live October 26: Big tech stocks fall as Google owner Alphabet disappoints, Barclays benefits

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WPP shrugs Google Ad Tumble

WPP held its ground today despite a digital advertising slowdown reported by Google last night that shook the advertising world.

The British advertising giant said revenue rose 10% to £3.57 billion in the most recent quarter, suggesting clients are yet to back away from big ad campaigns.

Google’s numbers last night showed a sharp decline in its core search ads business, which is likely to hit its rivals shortly.

As the recession deepens, CEO Mark Read said, “We head into the final quarter of the year with confidence based on the leading competitive position of our businesses, our customer momentum and the knowledge that the actions we have taken to strengthen WPP are fading. We are.” well positioned to support our clients as they navigate the economic uncertainties ahead.”

The company attracted $1.7 billion in new business in the quarter, including from Nestle, Samsung and SC Johnson.

Inflation, particularly in employee salaries, is a clear concern and warns that operating margins could come under pressure.

The United States and Canada North America saw strong growth, with both markets growing at double-digit rates from 2019 levels, WPP said. Brazil and India also stood out, although COVID-19 lockdowns weighed on China, which fell 9% in the quarter.

Western Europe was “weaker,” Read said, with a 2.1% decline in adjusted like-for-like sales dragged down last year by a COVID-19 deal in Germany.

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Bad debts threaten Barclays

RISING interest rates have propelled Barclays to a £2bn profit over the last three months, some £200m better than City’s forecasts.

While that will please long-suffering investors, it could draw the attention of new Prime Minister Rishi Sunak, who is trying to fill a £40bn hole in public finances.

Banks argue that a windfall tax would only limit what they can lend to businesses and small customers. Critics say the extra profits are only due to rising interest rates and the banks have to pay.

The bank has set aside £381m to deal with expected bad debts but says it is not seeing high levels of customer distress so far.

CEO CS Venkatakrishnan said: “We stand ready to support customers and clients facing an uncertain economic environment and higher cost pressures. Whether we are helping individual clients manage their finances or helping corporate clients manage market volatility, we will remain focused on meeting their needs.”

Santander and Standard Chartered also posted strong returns today.

Markets.com’s Neil Wilson said: “Barclays beat expectations on rising trading revenue. FICC trading (fixes, currencies and commodities) revenues were up 93% but there was still almost £1bn hit by a trade error in the US. Stocks aren’t seeing much of a boost from this — the usual concerns that trading returns might be one-offs, but investors aren’t confident about seeing returns either. While the record is good, there is a lot of economic uncertainty and worries about an unexpected tax on banks.”

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Heineken shares plunge 8% on consumer demand fears

Heineken’s shares plunged 8% today, erasing around £3bn from its market value, after the Dutch brewer warned it had seen signs of weakening consumer demand.

The Amsterdam-based company, which also owns the Tiger, Amstel and Birra Moretti brands, reported 8.9% growth in beer volume in the third quarter of 2022, up 1.9% from 2019 levels, while net sales per Hectoliters increased by 11.1% as a result of price increases and some consumers switching to premium products.

Heineken CEO Dolf van den Brink said: “We are increasingly seeing reasons to be cautious about the macroeconomic outlook, including some signs of weakening consumer demand.”

Despite fears of a fall in demand, Heineken maintained its full-year guidance and said it plans to deliver €1.7 billion (£1.5 billion) in efficiency savings to improve productivity and offset input cost inflation.

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Fantasy novels boost sales at Bloomsbury publishing house

Political and economic turmoil has prompted a surge in fantasy novel sales as readers turn to make believe to escape the harsher reality, according to London-based publisher Bloomsbury.

The company posted sales of £123m in the six months to August, up 22% on growing demand for titles such as Sarah J. Maas’ bestselling Crescent City: House of Sky and Breath (see above).

Bloomsbury boss Nigel Newton said: “I think what’s most interesting is the importance of escapism to people – we’ve seen a huge surge in orders for our fantasy novels.

“The daily disaster soup has been served to us by the cost of living crisis, incompetent politicians and the war in Ukraine, all sorts of things you might want to escape and write in a book instead.”

Bloomsbury shares rose 4% to 424 pence.

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FTSE 100 flat, Reckitt and WPP shares 3% lower

The FTSE 100 index is close to its opening level – down 7.67 points to 7005.81 – but shares in WPP and Reckitt Benckiser are down 3% following their latest updates.

WPP reported a 10% increase in third-quarter revenue and “continued strong momentum,” but shares fell 26.2p to 743.4p as investors rallied after Google-owner Alphabet’s disappointing update last night Digested signs of advertising weakness.

Dettol-to-Nurofen business Reckitt grew like-for-like sales 7.4% in the third quarter, but that didn’t prevent shares from falling 154 pence to 5812 pence.

On the risers board, AstraZeneca shares rose 229p to 9982p and Mexican silver miner Fresnillo rose 4.4p to 718.6p on a production update.

The FTSE 250 index fell 50.04 points to 17,781.59p, led by Bytes Technology, as shares in the software and cloud services business fell 4%, or 18.8p, to 419.2p after the half-year results fell.

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Tech sector weakness hits markets, FTSE 100 flat

Futures markets are forecasting the tech-focused Nasdaq to fall 2% when trading resumes after disappointing numbers from big tech stocks Alphabet and Microsoft.

Alphabet’s revenue rose 6% to $69.1 billion in the third quarter, but that was more than $1 billion short of guidance as advertisers cut spending more than expected.

Hargreaves Lansdown analyst Sophie Lund-Yates said: “The slowdown in ad revenue came as no surprise, but the speed of the slowdown was undesirable and the market is still very sensitive to the changing tides.”

With earnings also falling below expectations, shares in the Google and YouTube businesses fell 7% in after-hours trading last night.

The cautious lead caused Microsoft shares to fall by a similar level, even as the company reported stronger-than-expected earnings from its cloud-based services.

US markets closed higher ahead of tech sector updates and investors were mounting hopes that the Federal Reserve will slow the pace of rate hikes from December.

CMC Markets expects the FTSE 100 index to open flat at 7013.

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Barclays reports £2bn profit, arrears steady

Barclays profits hit £2bn in the third quarter, resulting in a profit of £5.7bn for the year to date as lenders benefit from rising interest rates.

Quarterly profit is 6% up year-on-year.

The potential impact of inflation and rising interest rates meant the bank’s UK arm recorded a £129m loan loss provision in the quarter, compared to a net release of £306m a year earlier.

It pointed out that backlogs at its UK cards business remain below historical levels.

Chief Executive CS Venkatakrishnan said, “We stand ready to support customers and clients who are facing an uncertain economic environment and increased cost pressures.”

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Made.com suspends customer orders after rescue efforts fail

Made.com has suspended customer purchases after failing to find a buyer in a bid to save the ailing furniture store.

In a statement, the company said: “Given that MDL [Made Design] relies on MADE for any further funding needs and to preserve value for its creditors, the Board of MDL has taken the decision to temporarily suspend new customer orders.

“This decision is still under review and a further announcement may be made.”

In recent months the company has warned it is considering staff cuts and would need £70m in funding to secure its future over the next 18 months.

Yesterday Made said attempts to find a buyer had been unsuccessful. The company said: “Following further discussions, these parties have now all confirmed to the company that they are unable to meet the required timeline. As a result, these discussions have ended and the Company is no longer receiving any funding proposals or potential offers.”