Market report: easyJet reduces losses and oil price continues to fall
Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown: “UK blue-chips are expected to rise, despite choppy trading in the US. Stickier inflation and a reimagining of the Federal Reserve’s interest rate timelines, together with relatively soft earnings so far this season, means investors have struggled to get too excited across the pond. This of course comes after five months of very strong gains, so an element of breathing room was to be expected at some point – the question now, of course, is whether this is a pause or a more protracted reaction. The UK market, on the other hand, is being lifted by mining stocks amid higher commodity prices. Iran and Israel tensions are also slightly less heightened than they have been, which should inject some relief into trading.
Disruption in the Middle East has led to a £40mn direct impact for easyJet in the first half. Flying into Israel has been suspended for the summer. In true easyJet fashion, the group’s been able to flex its unexpected capacity to other areas, and has still been able to reduce losses compared to the previous year. easyJet’s best-in-class approach to capacity planning and route discipline has allowed it to be one of the biggest beneficiaries of travel’s renaissance. The budget airline has also upped its capacity by around 8% to meet swelling demand. It’s clear the importance of travel isn’t petering out for consumers, and easyJet has grasped the nettle by backing its holidays business which has paid dividends. Summer bookings look strong, which will continue to help offset the rising costs.
Another important consumer bellwether, Dunelm, has reported that sales rose 3% in the third quarter – led by volume. While this suggests consumers are still prepared to part ways with their cash on homewares, the market remains very challenging. Dunelm speaks of volatile trading patterns and profits aren’t expected to be especially impressive. While Dunelm is one of the strongest names in the sector, and the most nimble, this corner of retail faces an uphill battle for now. Customers are prioritising their trips to the sun and putting off replacing the curtains. This could make Sainsbury’s results a challenging read next week, as the supermarket giant has large exposure to general merchandise.
Fewer prospects of US interest rate cuts, and weaker economic data from China for March have dampened oil’s demand outlook, offsetting anxiety surrounding the Middle East. Brent crude dropped 3% in the last trading session, and is now trading at $87.4.”