European investors on Wednesday shook off a disturbing decline in user numbers for Netflix, but the setback for the lockdown winner was expected to prompt a fresh round of portfolio rethinks.
‘Market sentiment has improved in the middle of the week, with declines in haven assets like gold and the US dollar echoing the paused sell-off in Treasury bonds. Investors are seizing the opportunity brought by the earnings season to reallocate their exposure to some sectors, with rotation from growth to value stocks lingering as a key question as most traders still struggle to assess which can outperform the market for the rest of 2022,’ said Pierre Veyret, an analyst at ActivTrades.
The FTSE 100 was up 28.81 points, or 0.4%, at 7,630.09 midday Wednesday. The mid-cap FTSE 250 index was up 73.87 points, or 0.4%, at 21,036.04. The AIM All-Share index was up 1.51 points, or 0.1%, at 1,057.23.
The Cboe UK 100 index was up 0.2% at 759.40. The Cboe 250 was up 0.3% at 18517.50, and the Cboe Small Companies up 0.1% at 15,360.77.
In mainland Europe, the CAC 40 in Paris was up 1.4% while the DAX 40 in Frankfurt was up 1.2% on Wednesday. Powering the Parisian index higher was Danone, shares up 9.0% after a 10% leap in first quarter sales.
The morning began cautiously in Europe despite a strong finish in New York, as some ominous guidance from video streaming giant Netflix after the closing bell gave investors pause for thought.
Netflix reported a loss of 200,000 subscribers during the first quarter of 2022, having previously guided to add 2.5 million net subscribers during the period. Even more worryingly, Netflix forecasts a loss of 2.0 million subscribers in the second quarter.
‘It's two bad earnings releases in a row for the world's largest streaming service,’ noted Deutsche Bank.
Netflix shares were trading 27% lower pre-market in New York on Wednesday.
The stock looks set to weigh on the broader tech-heavy Nasdaq Composite index, which was called down 0.1% ahead of the open. Set to fare little better, the Dow Jones Industrial Average was pointed to a 0.1% rise and the S&P 500 called flat.
Attention will shift from Netflix later in the session, as investors await earnings from electric car maker Tesla and from United Airlines.
In London, CRH was leading the gainers in the FTSE 100, shares up 4.4% at midday. The building materials firm said it has started 2022 on a strong footing, with growth in earnings and sales expected for the first half.
CRH expects sales, Ebitda, and margin for its half-year to be ahead of the first half of the prior year, when Ebitda came in at $2.0 billion. It expects positive demand in North America to continue, and its Europe Materials business to be able to weather the negative impacts of energy cost volatility and the war in Ukraine to deliver a like-for-like Ebitda ahead of the prior year.
SSE rose 3.1% after agreeing to buy Siemens Gamesa Renewable Energy's existing European renewable energy development platform for €580 million. Around half the portfolio is located in Spain with the remainder across France, Italy and Greece. Power utility SSE noted the transaction marks its entry into southern Europe.
Rio Tinto was at the bottom of the FTSE 100 index, down 2.3%. The miner reported a ‘challenging’ quarter for its key Pilbara iron ore operations, though the company left annual guidance unchanged.
In the first three months of 2022, total iron ore shipments from the Western Australia-located asset fell 8% annually to 71.5 million tonnes. Quarter-on-quarter, shipments declined by 15%. Iron ore production from Pilbara fell 6% yearly to 71.7 million tonnes and 15% from the fourth quarter of 2021.
ITV shares were down 2.3% in a negative read-across from Netflix. The broadcaster at the start of March unveiled plans to launch a new streaming service, dubbed ITVX and touted digital-first content investment of £160 million in 2023.
At the bottom of the FTSE 250 was Oxford Biomedica, down 9.7% after warning it will swing to a loss in 2022 and revenue will fall as Covid-19 vaccine manufacturing for AstraZeneca will take a pause.
The Oxford-based company, which develops gene and cell therapies and manufactures drugs for other pharmaceutical firms, said talks with FTSE 100-listed Astra for a possible extension of a supply deal are continuing.
Centamin fell 7.2% amid lower revenue in the first quarter ended March 31. Revenue dropped by 8.1% to $174.6 million from $189.9 million a year ago, as gold production fell by 11% to 93,109 from 104,047 ounces
Petershill Partners rose 4.2% after posting a maiden profit as a listed company, declaring a dividend and setting out plans for a $50 million share buyback.
The investment vehicle managed by Goldman Sachs Asset Management had its initial public offering on the London Stock Exchange in late September last year, raising $720 million.
Pretax profit for the period running from March 24 to December 31 was $260.5 million. Income was $137.5 million, while the positive change in fair value of investments was $234.0 million.
Elsewhere, shares in Just Eat Takeaway.com rose 7.6% after the takeaway delivery company said it is exploring a partial or full sale of its Grubhub US food delivery unit.
It is exploring options for the unit, which could include introducing a ‘strategic partner’ in order to sell a stake, or even all of its holding in Grubhub, which it agreed to purchase back in June 2020 for $7.3 billion.
Also on Wednesday, Just Eat Takeaway said its fortunes at the start of 2022 stacked up well against the Covid-19 boosted first quarter of 2021, though it slightly tweaked annual guidance. The company added that it expects profit to ‘gradually’ improve as the year progresses. The takeaway food company targets profit at an earnings before interest, tax, depreciation and amortisation level in 2023.
Sterling was quoted at $1.3061 at midday, higher than $1.2997 at the London equities close on Tuesday.
The euro traded at $1.0855, up from $1.0785 late Tuesday. Against the yen, the dollar was quoted at JP¥128.88, up versus JP¥128.77.
Gold was priced at $1,951.90 an ounce, down from $1,953.33 on Tuesday. Brent oil was trading at $107.62 a barrel, soft on $107.80 late Tuesday.
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