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FTSE Higher In Brexit Breather; Tough Quarter For Airlines

By City Index (Fiona Cincotta)Stock MarketsApr 16, 2019 09:55
FTSE Higher In Brexit Breather; Tough Quarter For Airlines
By City Index (Fiona Cincotta)   |  Apr 16, 2019 09:55
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The FTSE is trading higher Tuesday taking its cue from an uptick in Asian stock markets but also benefiting from a respite in Brexit news and the slightly weaker pound. Insurers are leading the way higher as are several services companies.

Sterling is struggling against the euro and the dollar ahead of the release of Germany’s ZEW index and US production data.

With Parliament in recess until after Easter and the Brexit deadline rolled into October sterling implied volatility has dropped to the lowest level in 16 months.

US bank results underwhelm so far, more to come

In the US bank results will be in focus again Tuesday following underwhelming earnings from Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS) yesterday. A 7.9% decline in Goldman’s share value was one of the main drags on the Dow Jones Industrial Average Monday contributing to a lower close on the day.

In the bigger picture this is the first quarter since 2016 that is expected to show overall weaker results across a number of US industries as hints of higher wages and in some areas declining demand work their way through the system. The earnings merry-go-round continues later today with earnings from Bank of America (NYSE:BAC) and Morgan Stanley(NYSE:MS) (NYSE:MS).

Airlines facing a tough quarter as fuel prices rise

Airlines have been feeling the pinch of rising oil prices which combined with overcapacity in Europe and stiff competition is eroding earnings. Releasing its results Tuesday morning Lufthansa (LON:0H4A) said that almost two thirds of its EUR300 million loss for the quarter was attributable to higher fuel costs.

The subsequent 5% drop in Lufthansa’s share price triggered a Europe-wide decline in airline shares, not sparing British Airways parent ICAG (LON:ICAG) and easyJet (LON:EZJ) in London. Air France KLM (LON:0LN7) and Sweden’s SAS (ST:SAS) were also hit.

Lufthansa’s results are only the beginning of a tough quarter. EasyJet (LON:EZJ) has already indicated that it expects to report a loss of GBP275 million while Icelandic airline WOW ceased operations last month. European airlines are already bracing themselves for a tougher summer expecting fewer British travelers because of Brexit.

Low levels of consumer confidence for Card Factory (LON:CARDC)

Card Factory has dangled the prospect of another special dividend in front of shareholders, helping to add some positive news to what is otherwise a relatively weak profit result.

It's always a concern when sales at existing stores are going backward while you're rolling out dozens of new ones. And that's the position that Card Factory finds itself in.

Low levels of consumer confidence are no doubt partly to blame for the fall in store footfall and management is right when they say the single greeting cards market is showing signs of resilience.

But these lower profit numbers will ultimately add to nagging doubts that a company selling paper cards from bricks and mortar stores can flourish in a world where folks can send amusing memes on Facebook (NASDAQ:FB) for free.

Standout performance for JD Sports (LON:JD)

JD Sports has beaten its own profit guidance with yet another standout performance that cements its status as a high-street star.

Sales haven't grown at the expense of margins, indicating management is still applying tight price discipline despite the harsher retailing environment.

The big question, though, is whether management can keep the good times rolling.

Nothing spoils a good run in business like a bad acquisition and JD Sports has been expanding its risk profile a lot of late.

It's too early to tell, of course, if management has put a foot wrong with moves on Footasylum and Pretty Green, neither of which was performing well when they were snapped up.

There's every possibility that Peter Cowgill and his crew can successfully sprinkle the JD Sports magic on these businesses. But investors will want to see more meaningful evidence that they can be turned around before adopting the same level of enthusiasm for what still look like surprisingly risky deals.

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.

Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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FTSE Higher In Brexit Breather; Tough Quarter For Airlines

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FTSE Higher In Brexit Breather; Tough Quarter For Airlines

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Aswin Kumar
Aswin Kumar Apr 16, 2019 16:04
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what will be the DAX 30 in upcoming days in this week..?
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