FTSE 100 hits new record high ahead of US inflation reading, Smiths Group unveils break-up plan, mooted production tie-up for ITV and mixed bag from Intel

“The FTSE 100 marked new record highs on Friday morning, taking its cues from solid trading on Wall Street as the recovery from Monday’s DeepSeek related volatility continued,” says Russ Mould, Investment Director at AJ Bell.

“Defence and energy names were among those giving the UK’s flagship index an end-of-week boost.

“Investors will be relieved that the markets have successfully negotiated a week full of major events including a Federal Reserve interest rate meeting and the start of the Magnificent Seven earnings season.

“Later on, there’s one more hurdle to get over this week as core PCE inflation data is released in the US. This metric is a big factor in informing the decision making of the Fed so a surprise in either direction could make markets increasingly febrile again.”

Smiths Group

“‘You say jump and I say how high’ appears to be the response of industrial conglomerate Smiths Group to pressure from activist investor Engine Capital.

“Smiths Group says it plans to spin off its Interconnect arm – which makes broadband connection and antenna parts – and Smiths Detection which makes X-Ray machines for airports. In reality, it is unlikely these decisions have been made purely because Engine published a letter a week or so ago. These plans have likely been in the works for some time, although whether they have been brought forward is another matter.

“Engine’s public communication with Smiths Group has to rank as among the politest of any activist on record, with praise for the work that has been done to improve the business but with the strong contention that its structure is holding it back. The positive market response to today’s announcement lends credence to this view.

“It’s not a new argument that Smiths Group should break up as its units would attract higher valuations as individual entities, and the company has demerged businesses in the past.

“However, Smiths Group has historically resisted calls for a full dismantling of its conglomerate structure. Next steps will be closely watched, with Engine also floating the possibility of a US listing for its John Crane energy services arm which Engine describes as its jewel in the crown.”

ITV

“Plenty of people have been banging the drum that ITV’s parts are worth more than the sum of the whole. The Studios arm is the key attraction as content is king in the modern media world.

“There has been speculation that RedBird IMI wants to merge its All3Media production house with ITV Studios. Nothing has been confirmed or denied, but there is logic to putting the businesses together.

“ITV has been under pressure from investors to halt the decline in its share price and realise hidden value in the business. In 2023, ITV showed interest in buying All3Media so it obviously thinks there is merit in working together. A merger would create one of the biggest forces in TV and film production.

“The big stumbling block is the fact that streaming platforms and broadcasters are cutting budgets and either commissioning fewer productions or asking for series to be shorter in terms of episodes and run-time. That somewhat clouds the outlook for a combined ITV Studios/All3Media entity, at least in the short term.”

Intel

“While chipmaker Intel’s fourth-quarter results were better than expected, subdued guidance meant this was a mixed rather than overwhelmingly positive set of results.

“Given the share price has nearly halved over the past year, it was sufficient to give the stock a boost in pre-market trading.

“Intel has been behind the curve on the AI theme – an area which has just been complicated for the makers of semiconductors and other artificial intelligence infrastructure by the emergence of DeepSeek. That’s left it at the mercy of soft demand for chips used in personal computers and smartphones.

“The controversial exit of CEO Pat Gelsinger at the end of last year provided the opportunity for a reset. To get the market back onside the company will have to deliver consistently improved performance and show that it can react to the changing dynamics in its industry.

“Intel has already carved out its foundry business as a separate subsidiary and its recently announced cost-cutting measures, including spinning off Intel Capital, aiming to align costs with its new model and address stagnant revenues.

“This action is part of the company's strategy to simplify its portfolio, reduce complexity, lower capital and operational costs, and suspend its dividend to prioritise business investments. Intel aims to enhance its long-term competitiveness by becoming a leaner, more agile, and well-positioned company to leverage future technological trends.”

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