European markets have got off to a slow start to the week, with the FTSE100 and CAC 40 outperforming their peers, while the rest of Europe has slipped back as caution sets in ahead of a packed week of macro data, central bank announcements, and earnings reports.
Europe
The travel sector initially came under pressure earlier today after Ryanair downgraded its guidance for full year profit to the lower end of forecasts, slicing the top end down from €2.05bn to €1.95bn, narrowing the window to between €1.85bn and €1.95bn. Q3 revenues came in at €2.7bn, however adjusted profit after tax fell to €15m, due to the airline having to cut prices to keep its load count above 90%. The losses didn’t last long with the shares quickly recovering in the afternoon session, setting a new 6-year high in the process.
The airline went on to blame the downgrade on the decision by online comparison sites to remove Ryanair from its listings which forced it to cut prices, as well as higher fuel prices. Ryanair also said it expects Q4 to remain its weakest quarter although with Easter coming at the end of March, we might see an end of quarter uplift.
There’s been little in the way of a reaction in the NatWest share price to reports that the government is looking to sell-off the remainder of its stake in the bank with a discounted share sale being touted as a one possible option.
Superdry shares are slightly higher on the back of reports at the weekend that the retailer is looking at a restructuring of the business, after another set of poor numbers in last week’s trading update saw the shares remain anchored at multiyear lows.
US
US markets opened little changed on Friday’s close with trading activity subdued ahead of a big week for earnings, with 5 of the Magnificent 7 set to report between now and Thursday, and the Federal Reserve set to keep rates unchanged on Wednesday.
The current value of these 5 companies of Apple, Amazon, Alphabet, Meta Platforms and Microsoft adds up to a total market cap of just over $10trn, putting the total value of all 5 at around 50% of the total market cap of the Nasdaq 100. Let’s hope this week’s earnings numbers are good.
Advanced Micro Devices shares are slightly lower even as Tesla Elon Musk announced a deal to buy AMD chips for Tesla EVs, although with AMD earnings due tomorrow there may be an element of profit taking kicking in here with the shares already at record highs.
Having seen their shares slump last week on the back of reports that the EU could block its $1.7bn acquisition by Amazon, Roomba vacuum maker iRobot this morning announced that both parties had agreed to terminate the deal with Amazon paying the company a separation fee of $94m. iRobot also said it would be laying off 31% of its workforce with the CEO Colin Angle stepping down. The company said it expected to make an operating loss of between $265m and $285m loss, on full year revenues of $891m, with the shares sliding to their lowest levels since 2009.
FX
The US dollar is slightly firmer across the board with the exception of the commodity currencies which are modestly firmer with traders keeping an eye firmly on this week’s Federal Reserve meeting, and any indications that the FOMC might give a steer on rate cut timelines.
The euro has come under pressure retesting last week’s low after comments from two ECB governing council members that were more dovish than expected. Portuguese ECB governing council member Centeno said that rate cuts should start sooner rather than later so that the process is gradual, without any need to wait for wages data. His comments were followed by Slovakia member Peter Kazimir who argued that rate cuts were also on the horizon although his confidence over timing was less fixed, but that June was more likely than April.
These comments are in contrast to recently hawkish commentary from the heads of the German and Austrian central banks, and serve to highlight the growing unease at the economic weakness that is acting as an anchor around the bloc’s recovery. The ECB is likely to be watching tomorrow’s Q4 GDP numbers from its big 4 economies of Germany, France, Italy and Spain, along with January inflation numbers later in the week.
Commodities
The increasing risk of an escalation in the Middle East rose at the weekend after 3 US services personnel were killed by a drone attack on the Jordanian border by Iranian proxies, however oil prices so far have seen little in the way of a reaction.
While Iran has quickly moved to distance itself from the consequences of the attack at the weekend, there is a concern that this defence is starting to wear a bit thin with some more hawkish members of the US body politic, with the US looking at a counterresponse.
There may come a time when the US will calculate that in supplying munitions to its proxies Iran is ultimately responsible for what happens next, given that they are to all intents and purposes giving them the means to attack US assets as well as its personnel.
For now, however oil prices are lower on reports that negotiators from Israel, Egypt, Qatar and the US have agreed a framework for the release of the remaining American and Israeli hostages.
Gold prices are higher on the back of the rising tensions in the Middle East, as well as a slightly softer tone in yields.
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