A negative lead from Asia saw markets in Europe open sharply lower earlier today, and although we’ve rebounded off the lows, it’s still difficult to determine an overall direction. Investors shrugged off a minor downgrade to global growth for this year from the IMF, however no one really pays much attention to what these organisations have to say in the wider scheme of things.
The biggest laggards have been in basic resources, which helped underpin yesterday’s FTSE100 gains. The problem facing investors right now is the bi-polar nature of markets one day to the next. Since July we’ve seen moves to the upside, as well as the downside, but within a clearly definable range.
While investors want to believe a narrative that can see equity markets move higher, any optimism is being tempered by the prospect that rising prices, as well as supply chain disruptions, may well negatively impact profit margins, as well as prompting a consumer slowdown.
The main change since July has been a sell-off in bond markets, which has seen yields move quite a bit higher, reflecting much more elevated inflation expectations over the next six to 12 months, and it will be company guidance over the next few months that may well dictate where we head next.
Airlines have been another drag today, with IAG and Ryanair in negative territory after
easyJet announced a full year loss of just over £1.1bn.
The numbers weren’t all bad, however today’s update also serves to illustrate the challenges facing the industry as we head into another fiscal year which is still likely to be pandemic affected. We’ve seen a decent rally off the lows this year, however the rebound has been somewhat constrained with the shares pretty much where they were at the start of this year.
Today’s Q4 update showed that the airline reached 58% of 2019 capacity, flying 17.3m seats, which was slightly above what it expected in early September, and well above the 17% in Q3. Nonetheless it still fell slightly short of the 60% it had hoped for in its initial Q3 numbers. In a sign that it is more optimistic about its next financial year it raised its capacity guidance for Q1 from 60%, to 70% of 2019 levels.
The recent rights issue has helped reduce its debt to £900m from £2bn giving the airline a solid platform from which to build its resilience for its next fiscal year. With rising fuel prices, a significant headwind easyJet has said it is 55% hedged for the year at $500 a metric tonne, with current spot prices currently 50% higher.
Source : https://www.theguardian.com/business/live/2021/oct/12/uk-unemployment-vacancies-payrolls-pay-growth-imf-markets-ftse-energy-business-live?page=with:block-6165b5138f08880f7f0541d0451