As stock markets react to latest news from US policymakers, our head of markets rounds up the action overseas and looks at the performance of Ladbrokes and Foxy Bingo owner Entain.
More recent market rallies on both sides of the pond have tended to lack conviction, with any positive direction of travel seemingly unsustainable against a cocktail of concerns.
Even though it was widely expected that the Federal Reserve minutes would confirm that the door was open to more aggressive monetary tightening if appropriate, the confirmation was enough to unsettle investors.
While the declines were broad based in the US, the Nasdaq again bore the brunt of the selling as high-growth stocks were marked down given their negative exposure to higher interest rates. The latest dips keep all of the main indices comfortably in negative territory for the year, with the Dow Jones down by 5.1%, the S&P500 by 6% and the Nasdaq by 11.2%.
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Similarly, a raft of additional sanctions on Russia had been trailed and also came to pass. However, the lack of an obvious resolution to the current conflict is continuing to weigh on general sentiment, even before the true costs to the global economy become more measurable over the coming months.
Meanwhile, the FTSE100 is attempting a brave stand against the generally downbeat sentiment. However, although still ahead by 2.6% in the year to date, the index has opened lower today having also succumbed to the wave of companies going ex-dividend, which is a natural headwind on the day’s price movements.
As expected, gambling firm Entain's (LSE:ENT) first quarter update was slightly marred by a drop of 8% to online net gaming revenue compared to the strong comparatives of the previous year, when various shades of lockdowns were still in place. More positively, however, overall net gaming revenue increased by 31%, underlining the ongoing growth potential of its portfolio of brands, while Retail is now returning to within 5% to 10% of pre-pandemic levels.
Such growth at the owner of Ladbrokes and Coral betting chains has attracted unsurprising interest from the US, where an ultimately unsuccessful bid of $22 billion from DraftKings in September followed a similarly unsuccessful attempt by Entain’s US joint venture partner MGM Resorts.
Entain has since continued to reap the benefits of the ongoing JV with MGM through BetMGM, which has jumped to second place in terms of market share in those places where it operates. In addition, this part of the business is now expected to turn earnings positive next year after another period of strong growth.
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The failure of the bid approaches has held back Entain in terms of share price appreciation, where an increase of 3% over the last year compares to a gain of 10% for the wider FTSE100.
While the sector is swimming against a rising tide of regulation in the UK, the potential for success in the burgeoning US market has appealed to many of the larger UK players, with BetMGM being Entain’s entry point and the provider of an increasing presence. With this in mind, prospects for Entain are extremely positive should the rate of success continue on both sides of the pond, and the market consensus of the shares as a "strong buy" underlines this optimism.
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