Shares round-up: Shell and BP extend rally, but ITV hit hard
19th April 2022 12:33
by Graeme Evans from interactive investor
With so many pulleys and levers dictating market direction right now, our City expert explains just what is behind some sharp movement in these popular shares.
Bullish ratings on BP (LSE:BP.) and Shell (LSE:SHEL) shares were the exception today as analysts downgraded a number of widely-held stocks including ITV (LSE:ITV), Marks & Spencer Group (LSE:MKS) and SSP Group (LSE:SSPG).
The re-opening of the London market after the four-day holiday brought a flurry of changes as City firms reviewed cost of living pressures and outlook for sharply higher interest rates.
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Their cautious assessment contributed to a lacklustre session overall as traders also worried about China’s economy following Covid controls in cities including Shanghai.
Bank of America today downgraded its China GDP forecast from 4.8% to 4.2% for this year, even though yesterday’s first-quarter figure came in ahead of expectations at 4.8% and there are signs that some of the lockdown restrictions are now being eased.
The bank said a heavy toll on growth already seems inevitable, particularly if China adheres to its zero Covid strategy until the 20th Communist Party Congress in the autumn.
It warned that disruptions to supply chains will likely surface and ripple across the world in three to six weeks' time and last at least until the end of the second quarter.
Mining stocks surrendered their initial gains but the China uncertainty failed to derail BP and Shell as Brent crude stayed above $110 a barrel and the pair got support from JP Morgan.
The City bank pumped up its price target on BP by 20p to 500p and Shell from 2,700p to 2,850p. The pair were later 4.5p higher at 403.95p and 38p stronger at 2,230p.
They were joined on the risers board by Royal Mail (LSE:RMG) and Rolls-Royce Holdings (LSE:RR.), while Tesco (LSE:TSCO) and B&M European Value Retail SA (LSE:BME) were higher despite Berenberg trimming its “buy” recommendations on both retailers to 320p and 630p respectively.
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The broker’s negative view on ITV had much more of a dramatic impact after the broadcaster’s price target was halved from 128p to 64p, sending shares down 2.5p to 74.5p.
The blue-chip stock was 110p prior to annual results in early March, when boss Carolyn McCall unveiled plans to launch streaming platform ITVX.
FTSE 250-listed Marks & Spencer also felt the force of Berenberg’s red pen, even though the retailer continues to have a “buy” rating. The retailer lost a penny to 148.3p as the broker lowered its price target from 265p to 215p.
The wider FTSE 250 index fell 181 points to 20,939 by lunchtime, with Wizz Air Holdings (LSE:WIZZ) and food travel business SSP among the biggest fallers after City downgrades.
SSP, the company behind brands Upper Crust and Camden Food Co, fell 13p to 231.6p as Deutsche Bank ditched its “buy” recommendation with a new price target of 265p.
The downgrade followed its review of the European catering sector, whose recovery from Covid has been hampered by rising energy, food costs and wages. Top flight stock Compass Group (LSE:CPG) has a 1,750p target price and “hold” recommendation.
Deutsche Bank’s note said: “Our economists now believe that the only way to lower inflation will be through aggressive interest rate hikes in the second half of 2022 and 2023, which we believe could trigger a recession at the end of 2023 or early 2024.”
Concerns over fuel costs hit Wizz Air, whose shares have been on the recovery trail in recent sessions due to hopes for a robust summer of holiday bookings.
HSBC is worried that the low-cost carrier’s fuel hedging policy has put it at a strategic disadvantage compared to Ryanair, prompting airline analyst Andrew Lobbenberg to downgrade Wizz to “reduce” with a price target of 2,500p.
Peel Hunt analysts are more optimistic, however, with a price target at 4,700p.
The broker said: “Wizz Air offers substantial fleet and capacity growth that should support a further reduction in unit costs. Demand is recovering and the oil price is cyclical, with history indicating it is unlikely to remain above $100 a barrel indefinitely.”
Wizz shares today fell back 177p to 2,939p.
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