FTSE 100 higher as markets welcome Trump’s Treasury pick, , ITV up on takeover chatter and InterContinental Hotels in JPMorgan Chase tie-up

“The FTSE 100 made a decent start on Monday morning after US president-elect Donald Trump’s pick for Treasury secretary got a warm reception from the market,” says AJ Bell investment director Russ Mould.

“Hedge fund manager Scott Bessent is perceived as being a relatively conventional and safe pair of hands candidate and the market gains in Europe following the news were matched in Asia. Importantly, Bessent is seen as being less aggressive on tariffs than some of the rhetoric espoused by Trump on the campaign trail.

“A fall in bond yields in response to his unveiling suggests some of the concern about a new wave of inflationary pressures from import tariffs has eased and that Bessent might be able to do something to bring the US deficit under control. He has also spoken in favour of corporate tax cuts – solidifying a part of the new administration’s policy agenda which appeals to investors.” 

Kingfisher

“Kingfisher has a growth problem and until the backdrop radically improves, it is stuck in quicksand, slowing sinking. The home improvement retailer continues to keep its chin up and offer reasons to be optimistic, but in reality, there is always something holding it back.

“Consumers have tightened their belts amid uncertainties around policy changes from new governments in the UK and France – two of its major operating regions. That’s caused a wobble to sales.

“It also faces significant headwinds from various tax changes and there is only so much these can be offset by finding new cost efficiencies. Companies have spent the past few years focusing on operating improvements and it’s hard to keep finding new ways to save money without cutting back too far and damaging service levels.

“Kingfisher’s expectations for home improvement market growth implies a difficult operating environment. The best case for the UK is a flat performance and in France it’s for a low-single-digit decline. Poland is the saviour with the best-case scenario being low-single-digit growth.

“The share price enjoyed a bounce earlier this year on signs of stabilisation in the business and better than expected cash flow. The stock strengthened as a sigh of relief rather than solid earnings progression. It was simply that earnings forecasts were no longer being downgraded after a long spell of cuts to estimates.

“Hopes of better times ahead have gone up in a puff of smoke. Investors are royally cheesed off by the third quarter update judging by the big share price sell-off and earnings downgrades have recommenced.

“It means Kingfisher remains in the club of companies which prospered during the pandemic but have struggled ever since. A plan is in place to drive greater sales to trade customers, do more via e-commerce, and roll out more compact stores. This plan will only work if homeowners are ready and able to splash the cash on home improvement projects, supported by a strong economy which makes people feel secure in their jobs and happy to shell out money.

“Consumer sentiment remains patchy and economic growth lacklustre, which suggests darker days ahead for Kingfisher.”

Anglo American

“It’s the end of an era for Anglo American as it joins Rio Tinto by fully exiting coal production. While BHP and Glencore are still digging up the black stuff, we now have two of the largest UK-listed diversified miners turning their back on the commodity and sharpening their focus on fewer product lines.

“Anglo American’s sale of coal assets to Peabody represents the first tick in the box for the new strategy outlined in May as part of its efforts to fight off takeover interest from BHP. Next on the list is demerging its interest in Anglo American Platinum, expected by mid-2025, and selling its nickel assets.

“Getting out of the De Beers diamond operation might take longer as there are political factors to consider, given how the Botswana government owns 15% of the company and Anglo American can’t simply enact a straightforward corporate sale.

“Five years ago, the prospect of a miner getting out of coal would have been celebrated by investors from an ESG perspective. Now, there might not be such enthusiasm if it can be shown that coal can generate big money going forwards.

“Oil producers in the US and increasingly in the UK have realised that the use of fossil fuels isn’t going to disappear overnight because of efforts to be more environmentally friendly. There is still big money to be made from oil and producers are now making hay while the sun shines. The same argument could be made for coal.

“Glencore recently did a U-turn on spinning off its coal arm, saying investors recognise that cash is king and coal can be a big money-maker to fund dividends, share buybacks and expansion in clean technology minerals. Effectively, without coal in its portfolio, Glencore might not be able to keep up the level of shareholder distributions that investors have enjoyed in the past.

“The $4.9 billion price that Anglo American has got for its coal assets (across the Peabody deal and a recent joint venture divestment) means there is a nice cash injection into the business to strengthen its balance sheet. However, streamlining the portfolio also cranks up the pressure to get better results from the remaining assets.

“Anglo is prioritising copper, premium iron ore and crop nutrients – just at a point where metal prices have been weak due to global economic uncertainty. It needs to keep banging the drum that these areas have big opportunities longer term and that any short-term issues can be overcome.

“The streamlined strategy might help the business to have more focus but it also increases Anglo’s takeover appeal to a third party with a metal focus. Alternatively, while BHP is unlikely to come back with another takeover bid for the whole company, it could easily try to cherry pick assets.”

ITV

“A depressed valuation and relative weakness in sterling are the context for reports of bid interest in ITV – with the possibility of yet another domino falling in a UK market which has seen plenty of M&A in 2024.

“ITV has faced a difficult transition away from its reliance on linear TV advertising and its push into areas like streaming and TV production haven’t done enough, rightly or wrongly, to impress the market.

“Several names from private equity and within the industry have been suggested as potential suitors – although nothing has emerged yet which has reached the threshold required for ITV to make any disclosures. Whether ITV’s public service broadcasting remit might be an obstacle to any deal remains to be seen.

“There is further speculation that ITV might look to demerge the business on the basis that the individual parts might attract a better valuations as standalone entities – particularly its ITV Studios production arm.

“The latter has endured a lingering effect from the Hollywood writers’ strike last year, which pushed back many productions, and the more disciplined spending approach of the big global streaming giants. However, it has also enjoyed some notable successes this year including Rivals on Disney+ and Mr Bates vs The Post Office.

“ITV has made progress with ITVX – which received a mixed reception at launch but has built a sizeable audience and meaningful digital advertising revenue in the interim.”

InterContinental Hotels

“Holiday Inn owner InterContinental Hotel’s tie-up with JPMorgan Chase Bank may sound relatively prosaic but the deal could add an exciting stream of income.

“The hotels operator is essentially leveraging its customer data as part of an arrangement which will see it offer co-branded credit cards to members of its royalty scheme. 

“The resulting ancillary revenue stream comes at little extra cost to the business – making this a potentially lucrative activity.”

These articles are for information purposes only and are not a personal recommendation or advice.