The FTSE 100 closed down 0.2% at 7,401.94 on Thursday (4 April) despite some weakness in the pound as UK stocks responded to a lukewarm open on Wall Street.
However much the markets might want to ignore it, Brexit will remain in focus next week with the cross-party negotiations to prevent a no-deal exit on Friday (12 April) continuing as we write (see Economic update). Otherwise it’s a quiet start to the week enlivened on Wednesday (10 April) by the latest monthly UK GDP figures, the European Central Bank’s latest pronouncement on interest rates and finally the minutes of the US Federal Reserve (Fed) last meeting to set its own rates. The latter should offer some insight into the thinking of the Fed. Next Thursday (11 April) US inflation figures are published.
There were contrasting updates from the airlines sector this week. On Monday (1 April) budget carrier EasyJet (EZJ) warned of weaker customer demand and lower ticket prices as prolonged Brexit-related uncertainty deters holidaymakers from flying. Over EasyJet’s first half of its financial year (the six months to 31 March) the company estimates revenue per seat declined 7.4% in line with expectations amid a forecast pre-tax loss of £275m. Over the last year, shares in EasyJet have tumbled as airlines engage in a cut-throat price war and battle rising costs and disruption from various strikes. Then on Tuesday (2 April) Wizz Air (WIZZ) defied the gloom to report that its net profit in the year ending 31 March 2019 is expected to hit the upper end of its guidance range of €270m and €300m. The Hungarian airline revealed passenger numbers jumped 16.7% to 34.5m in the year to 31 March. Load factor, which measures how effectively airlines fill their flights, rose from 91.3% to 92.8% over the same period. Wizz Air has also enjoyed a robust start to its financial year as revenue per available seat per kilometre is expected to grow 4% year-on-year in the quarter to June, driven by ancillary sales and the timing of Easter.
Negotiations between Theresa May and Labour leader Jeremy Corbyn are ongoing amid attempts to avert a no-deal exit from the EU next Friday (12 April). May says either the two parties will come up with a single deal to put before the House of Commons or a series of options. Much is likely to hinge on the potential for UK participation in European elections when EU leaders meet for an emergency summit next Wednesday (10 April). For now, sterling is fairly steady, but a no-deal outcome would likely put the currency under significant pressure.
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10 April – Online fashion retailer ASOS (ASC) has endured a tough time of late. A big profit warning in December 2018, when the company flagged a sales shortfall and a halving of the operating margin, was followed by a weak trading update in March which revealed capacity problems in its US business. The company will need to demonstrate it can get growth back on track and that it has a firm plan to address the issues across the Atlantic when it reports first half numbers if it is to win investors over.
11 April – First half results from retail stalwart WHSmith (SMWH) are likely to follow the same pattern as seen for several years with a strong travel arm somewhat offset by a declining performance on the high street. The travel arm generates more than half of group sales and the lion’s share of profit, and the market will be looking for updates on plans for international expansion on the travel side.
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