Market report

EasyJet sees ‘softening’ | Menzies robust | Omicron fears return


5pm: Markets lacking direction

Markets were searching in vain for clarity on the Omicron variant and government response to it, and the FTSE100 understandably slid, though it closed off its intra-day lows at 7,059.45, down 50.50 points (0.71%).

Danni Hewson, AJ Bell financial analyst, said: “It’s difficult for investors to figure out what moves to make when even the clever folk that make vaccines seem to be at odds over exactly where we are when it comes to fighting the fight against Omicron.

“Will existing vaccines work? Will they need to be tweaked? How quickly can that happen? So many questions troubling markets, governments, and people.

“Of the big pharma Covid names only Pfizer’s been in positive territory with its share price after the boss said it was not only working on a vaccine with the new variant in mind but that it was confident its Covid treatment pill would already be effective against Omicron. 

“London’s FTSE 100 looked a little chirpier this afternoon, but it couldn’t find the up button despite some solid performances particularly from miners.

“But the worry about how this crucial Christmas will really play out for retail, hospitality and the beleaguered travel sector has taken a toll. Looking back since close of play on Thursday share prices in companies from IAG to M&S, Wetherspoons to Cineworld have tumbled by as much as 16%.”

11am: TSB closing more branches

TSB is closing 70 branches next year as the move to digital banking accelerates.

Full story here

9.30am: Markets dip on Moderna warning

The FTSE 100 was just managing to stay above the 7,000 level after a warning from Moderna boss Stephane Bancel that existing vaccines would struggle with the Omicron variant. That was enough to send investors into a new panic. The index was down 96.64 points (1.36%) in line with pre-open forecasts at 7,013.31.

AJ Bell investment director Russ Mould, said: “Markets hate uncertainty, and this is precisely what we have now. No-one knows how much trouble the new variant is going to cause, and so it seems plausible that we will see heightened volatility on the markets until there is adequate data to better understand the lay of the land.

“However, in the bigger scheme of things today’s sell-off could have been a lot worse. European markets were down 1% or less. That’s become a normal day’s movement on many occasions over the past year or so.

“Interestingly some of the big mining stocks saw share price gains. If the new variant causes disruption to economic recovery, one might conclude that commodities demand could weaken.

“However, the fact that stocks like Anglo American are rising in a falling market would suggest that investors aren’t panicking and automatically dumping anything economically-sensitive.”

8.15am: Retail partners

Waitrose has announced a partnership with Edinburgh and East Lothian convenience store chain Margiotta to expand its presence in Scotland. 

Full story here

7am: EasyJet makes encouraging start


EasyJet said it has seen some softening of trading for Q1 but is encouraged to see good levels of new bookings for H2 and still expects that Q4 FY’22 will see a return to near pre pandemic levels of capacity.

In the year to the end of September the airline posted a loss before tax of £1.14 billion, ahead of consensus (2020: £835 million loss). It said £4.4bn of liquidity provided renewed strength to capture opportunities. Revenue fell by 52% to £1.46bn (2020: £3.009bn).

Group headline costs decreased by 33% to £2.6bn (2020: £3.84bn), driven by a decrease in capacity flown and the material savings achieved across many areas of the business from easyJet’s continued cost focus. 

CEO Johan Lundgren said the company had enjoyed an encouraging start to this year with strong demand returning for peak winter holiday periods, coupled with increasing summer demand.

“EasyJet is moving through the pandemic with renewed strength having transformed the business by optimising our network and flexibility, delivering significant cost savings while also step-changing ancillary revenue,” he said.

“These initiatives alongside our strong, investment grade, balance sheet provide easyJet with renewed strength to manage any further Covid related travel disruptions, as well as a platform to fast track our growth and deliver strong shareholder returns. With this platform, we have the ambition to beat our targets set earlier this year.”

7am: Menzies confident

Aviation services company Menzies said it expects trading for the full year to be at least in line with market expectations after stronger than expected trading in recent months.

Globally, the air cargo services market remains robust, and the company is seeing a steady increase in aircraft movements in all regions, supporting the continued recovery in ground and fuelling services businesses.

Commercial momentum has continued with some excellent new contract wins and retention of key contracts. Year to date we report a record £73m net sales win in annualised revenue.

Philipp Joeinig, chairman & CEO, said: “Despite current news on travel restrictions, we have proved time and again that we are a resilient business due to our product mix, geographical diversity and the fact that less than 10% of our business relates to long haul passenger flights.

“Our increased focus on air cargo services and emerging markets is delivering great results and enhanced returns. We will continue to pursue our strategic priorities, and this will drive our business forward and allow us to deliver our growth ambitions.”

Global markets – oil and equities fall on vaccine doubts

Oil prices gave up gains, falling more than 2% along with broader financial markets, after a media report cast doubt on the efficacy of COVID-19 vaccines against the Omicron coronavirus variant.

The head of drugmaker Moderna told the Financial Times that COVID-19 vaccines are unlikely to be as effective against the Omicron variant of the coronavirus as they have been against the Delta variant.

Both benchmarks tumbled more than $1 on the news. Brent crude futures fell $1.82, or 2.5%, to $71.62 a barrel. U.S. West Texas Intermediate crude futures dropped $1.61, or 2.3%, to $68.34 a barrel.

Attention is also focused on the Organisation of Petroleum Exporting Countries’ (OPEC) meeting on Thursday and Iran nuclear talks.

With the demand outlook under a cloud, expectations are growing that the OPEC+, will put on hold plans to add 400,000 barrels per day (bpd) of supply in January.

“It is still too early to sensibly assess the risk that Omicron poses and this uncertainty is likely to add further volatility to the oil market,” ING Group said in a note.

Equities in London were expected to fall sharply again following the warning from Moderna.

London’s blue-chip index was expected to plummet almost 90 points following a rebound of 66 points yesterday and the 266-point plunge on Friday.

Overnight, Wall Street’s big three equity indices advanced, but Asian markets were in the red this morning.

12.01am: Service sector recovery continues

Optimism improved for firms across the service sector in the three months to November, according to the CBI – however cost growth in both sub-sectors continued to pick up, growing at the fastest pace since its survey records began in 1998. 

For business and professional services firms, sentiment about the business situation continued to improve in the quarter to November, albeit at a slower pace than in the preceding three months. Sentiment among consumer services companies improved markedly last quarter, following a deterioration in the three months to August. 

Despite elevated cost pressures, profitability grew in both business and professional and consumer services, with the strongest growth since February 2018 for the latter.

Employment growth within business and professional services picked up in the three months to November, recording the fastest growth in more than six years.

Firms’ investment prospects have strengthened, as services firms expect to ramp up their spending plans over the next 12 months, particularly on IT.

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