FTSE 100 underperforms as sector divergence widens
​The FTSE 100 closed lower as strong moves in individual stocks highlighted the divergence within the UK market. While continental European indices posted modest gains, supported by stronger performances in the automotive and technology sectors, the British benchmark struggled to find direction.
​British Airways owner International Consolidated Airlines Group (IAG) led the declines, plunging almost 10% in its worst single-day performance since April. The airline group cited weaker demand on North Atlantic routes and adverse currency movements, which weighed heavily on third quarter (Q3) revenue. This marks a worrying development for the travel sector as we approach the crucial winter booking period.
​The ITV’s 17% rise offset the index’s losses to some extent, but was not enough to prevent the FTSE from lagging behind its European peers. The STOXX Europe 600 rose 0.2% as the previous week’s tech-driven sell-off began to taper, although the broader European index remains on track for its biggest two-week decline since early September.
​The sector’s rotation within the UK market reflects wider uncertainty about the economic outlook. Traders are weighing the implications of weaker growth data against the Bank of England’s (BoE) more dovish policy stance, creating a challenging environment for directional bets on the index.
ITV shares soar on potential Sky takeover
​ITV posted its best single-day performance since 2009, jumping 17% after confirming it has entered talks with Comcast’s Sky over a possible sale of its broadcast and streaming operations. The move could fundamentally reshape the UK media landscape and represents a significant strategic shift for the broadcaster.
The talks focus on ITV’s main streaming and broadcasting arm, although specific financial terms have not been disclosed. For Sky, the acquisition would strengthen its position in the UK content market and provide valuable intellectual property rights. For ITV shareholders, the deal could unlock the value of assets that have been undervalued by the market.
Trading volumes in ITV shares rose well above average as investors rushed to position themselves ahead of potential new announcements. The media sector has seen increased consolidation activity in recent years as traditional broadcasters adapt to the streaming era, making this deal part of a broader industry trend.
The question now is whether Sky will press ahead with a formal offer and at what valuation. ITV’s market capitalization rose significantly on the news, but traders will be watching for any indication of the premium Sky might be willing to pay. Any deal would require regulatory approval, adding another layer of complexity to the timeline.
​Rightmove suffers its worst day on record
​Rightmove shares plunged 28% in their worst single-day performance on record after the property portal outlined ambitious AI-powered growth plans that will significantly pressure profit margins next year. Despite reaffirming the forecasts for 2025, the market did not view the company’s strategic direction favorably.
The liquidation highlights investor concerns about the costs associated with rolling out AI capabilities across Rightmove’s platform. While the company framed the investment as essential to long-term competitiveness, the short-term margin compression proved too much for many shareholders to bear.
​The property portal has enjoyed a dominant position in the UK property market, but increased competition and changing consumer behavior is forcing it to adapt. Investment in AI aims to improve the user experience and provide more sophisticated property comparison tools, but the execution risk is substantial.
UK property market shows mixed signals
UK property data painted a complex picture of the health of the property market. Halifax reported a 0.6% monthly increase in house prices in October, marking the strongest monthly increase since January. However, this national strength masked significant regional variation, with London stocks falling 0.3% year-on-year (YoY).
​Market data from Rightmove revealed that house listings have reached 10-year highs, a development that has helped keep national prices relatively stable despite firm underlying demand. Elevated supply levels suggest sellers are testing the market, potentially ahead of any policy changes that could affect property taxes or affordability.
​Rent growth has shown signs of moderation after the rapid increases seen over the past two years. This cooling reflects both a gradual improvement in rental supply and some flexibility in tenant demand as affordability constraints increase. The rental market remains tight by historical standards, but the most acute pressures appear to be easing.
The performance of the housing market will be crucial in shaping the Bank of England’s policy decisions. Higher home prices typically support consumer confidence and spending, but also raise concerns about financial stability and affordability for first-time buyers. Policymakers must balance these competing considerations when evaluating the appropriate path for interest rates.
The Bank of England maintains a dovish tone despite maintaining rates
​The Bank of England kept its bank rate unchanged at 4% but adopted a more dovish tone that has left markets divided over the prospects of a rate cut in December. Governor Andrew Bailey emphasized that inflation progress has been encouraging, although he wants to see more data before committing to an easing of policies.
Bailey’s cautious approach reflects the central bank’s desire to ensure inflation remains under control before easing monetary policy. The upcoming budget and consumer price index (CPI) data for October will be crucial data for the December decision. Markets are currently pricing in a roughly 60% chance of a 25 basis point cut next month.
UK government bonds underperformed their European counterparts as traders paused following the recent dovish price revision. The bond market had already moved to reflect expectations of earlier rate cuts, and investors are now awaiting fiscal policy details from the autumn budget before making further adjustments to their positioning.
​The Bank’s communications strategy has become increasingly important as it works its way back towards more normal interest rate levels. Too many dovish signals risk reviving inflation expectations, while excessive caution could unnecessarily prolong the economic adjustment. Finding the right balance will be critical to maintaining credibility and achieving the inflation target.
