Yahoo Finance Market report: Investors bet against big bookmakers
Investors were betting against bricks-and-mortar bookies on Tuesday on fears that the Government will defy the gambling watchdog’s recommendation of a lenient maximum stake on fixed-odds betting terminals.
The Gambling Commission called for a £30 upper limit last month to tackle problem gambling from the so-called “crack cocaine” of bookies, which allow punters to splurge as much as £100 in a single 20-second flutter. But various reports have indicated that the Government will instead bow to demands from anti-gambling campaigners and impose a £2 cap, the doomsday scenario for high street bookies.
The Treasury has reportedly backed plans to slash the maximum stake despite the likely plunge in tax receipts and concerns that gaming firms will be hit hard by the proposals.
City analysts have warned that thousands of shops could close and bookies’ revenue would take huge hits from a punitive outcome. Davy analyst David Jennings told clients that investors will also be spooked by suggestions that the Treasury will attempt to offset any tax revenue shortfall by increasing taxes online. Investec argued, however, that the annual tax impact would be half the estimated £450m the Treasury receives from the machines, thus reducing the need for additional taxes.
GVC, which recently upped its exposure to high street gambling through its Ladbrokes Coral swoop, tumbled 58.5p to 912.5p while William Hill nosedived 42.7p to 293.4p, a 13pc plunge. FTSE 100 firm Paddy Power Betfair slipped to its lowest level since September, dropping 355p to £69.65.
Elsewhere, defence giant BAE Systems rallied to a six-month high after Berenberg predicted that growth would rebound amid rising US defence spending and heightened geopolitical tensions. In an upgrade to “buy”, its analysts argued that its US business would be a “key” growth driver in the coming years as the White House sinks more funds into the US military, boosting shares 12.8p to 618p.
Peer QinetiQ was also on the rise after announcing a £61m acquisition for EIS’s Aircraft Operations business, lifting it 6.5p to 231.7p. The deal will increase its international exposure and provides an entry into the German defence market just as spending begins to increase, Liberum told clients. Pharma struggler Vectura slumped 4.9p to 82.1p after Japanese firm Sosei dismissed market chatter speculating that it was readying a bid.
Boosted by its buoyant energy giants BP and Shell, the FTSE 100 pushed up to a fresh 11-week high. The blue-chip index climbed 26.53 points to 7,425.40 as investors in Europe largely brushed aside worries over the benchmark 10-year Treasury yield breaching the 3pc mark for the first time since 2014.
