Must read: market moves, UK house prices, Entain, GSK, ITV

As three of the world's major central banks prepare to reveal their decisions on interest rates, our head of investment rounds up the market action and corporate results.

GLOBAL MARKETS 

European markets have opened cautiously higher, regaining some lost ground ahead of key central bank rate decisions today from the Federal Reserve and tomorrow from the Bank of England and the European Central Bank.

While the FTSE 100 is outperforming the CAC and the DAX so far this morning, performance is being tempered by a decline for Vodafone Group (LSE:VOD) which is trading at the bottom of the UK index after its third quarter update. 

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The UK is faced with a heavy day of industrial action from civil servants, university staff and rail and bus workers, with a total of approximately 475,000 workers striking on ‘Walkout Wednesday’. According to the Centre for Economics and Business Research, the total direct and indirect cost of UK strikes over eight months to January has been £1.7 billion in lost GDP. 

Stateside, investors are focused on tech earnings and the Fed which is expected to carry out a smaller 25 basis point hike at the conclusion of its two-day policy meeting later today. Last night Snap Inc Class A (NYSE:SNAP) shares plunged nearly 15% on disappointing revenues. Meta Platforms Inc Class A (NASDAQ:META) is next up with earnings after the bell followed by Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and Alphabet Inc Class A (NASDAQ:GOOGL) on Thursday after a slew of job cuts in the sector.

UK NATIONWIDE HOUSE PRICE INDEX 

UK Nationwide house prices grew by 1.1% year-on-year in January, falling short of estimates for growth of 1.9%. On a monthly basis, the figure declined by 0.6% also underperforming forecasts for a decline of 0.3%, representing the fifth consecutive monthly drop. Nationwide said economic headwinds are set to remain strong in the near-term. 

UK house price growth has fallen to the lowest level since mid-2020 at the height of the pandemic. Pressures from the cost-of-living crisis with sky high inflation, squeezed household budgets and rising interest rates are dampening demand in the UK property market. Potential buyers appear to be holding off for now until prices cool further and mortgage rates ease. With the Bank of England expected to raise rates again by 50 basis points, buyers look set to wait until we move beyond the peak for interest rates and lending affordability improves once again. 

UK housebuilders such as Persimmon (LSE:PSN) and Taylor Wimpey (LSE:TW.), which suffered heavy share price slides last year have had a strong start to 2023, anticipating the potential for the Bank of England to shift towards a less aggressive phase of tightening, and possibly even cut rates around the end of the year. However, that optimism is not yet being reflected in the housing market with further pain expected this year before conditions can start to improve once again.

ENTAIN 

Entain (LSE:ENT) expects full-year core profit to come in between £985 million and £995 million, up from its previous forecast for between £925 million and £975 million. There was a strong performance in the fourth quarter with net gaming revenue (NGR) up 11%. However, online NGR fell by 1%. It kept its long-term objectives of 20-25% market share and 30-35% EBITDA margin unchanged.

Entain enjoyed a boost in the final quarter of last year thanks to increased demand for sports betting during the football World Cup. However, tough year-on-year comparables versus last year during the pandemic weighed on online sales growth and regulatory changes continue to be a key headwind. 

Shares in Entain have had a very strong start to the year, rallying 12% in 2023. Since the October trough, shares have surged over 40%.

GSK 

GSK (LSE:GSK) reported fourth quarter adjusted profit of 25.8p per share, beating estimates for 21.2p per share, while sales hit £7.4 billion, ahead of forecasts for £7.1 billion. Its star shingles vaccine drug Shingrix achieved £769 million in sales, ahead of expectations for £748 million. 

GSK has been working hard on its Respiratory syncytial virus (RSV) vaccine, a market estimated to be worth $4 billion by 2027, with some analysts suggesting this is GSK’s biggest vaccine opportunity in a long time. However, GSK faces a headwind from lower covid-19 solutions revenue as the pandemic shifts into the rear view mirror. 

Since the spin-off of Haleon (LSE:HLN), GSK’s former consumer health arm, shares in the vaccine and drugmaker have shed around 20% weighed down by rising costs and the threat of US litigation over heartburn drug Zantac’s alleged cancer link last year. However, since the October lows, shares have been regaining ground amid a broader pick-up in demand for equities, with GSK’s defensive offering arguably well positioned to navigate the challenging macroeconomic backdrop of slowing growth and elevated inflation.

ITV 

Shares in ITV (LSE:ITV) are trading higher by around 3.5% following a report from Reuters suggesting Hollywood producer Peter Chernin and a French TV production group, FL Entertainment have expressed interest in ITV Studios, valuing the business at up to £3 billion. While ITV is reportedly open to selling a minority stake, the bidders would prefer to take control of the business. ITV Studios boasts hit shows such as Love Island, Line of Duty and The Chase. 

ITV has been trying to play catch up in the streaming wars lately with the launch of ITVX in December. But critics say it is late to the party, entering into a vastly competitive arena dominated by Netflix, Disney+ and others. It is also a highly expensive undertaking that could struggle to attract subscribers to fork out £5.99 a month during the cost-of-living crisis. 

ITV has been battling against the shift away from linear TV and a drop in advertising revenues amid the economic uncertainty. Selling part of ITV Studio could provide a cash tailwind to the group and a boost to its share price. 

While shares have had a strong start to 2023, the stock has still shed over a quarter of its stock market value over a one-year period. Analysts are cautious towards the stock with 5 hold recommendations, 2 sells and 8 buys.