LONDON MARKET PRE-OPEN: IAG posts narrowed loss, calls for support

(Alliance News) - Stock prices in London are seen opening higher on Friday following gains in Asian equity markets overnight, while focus will be on the US jobs report for April in the afternoon.

In early company news, British Airways-parent International Consolidated Airlines posted a narrowed loss for the first quarter. Holiday Inn and Crowne Plaza owner InterContinental Hotels Group said it is seeing signs of life in key markets.

IG futures indicate the FTSE 100 index will open 31.33 points higher at 7,107.50. The blue-chip index closed up 36.87 points, or 0.5%, at 7,076.17 Thursday.

International Consolidated Airlines Group said its first quarter was badly hurt by the Covid-19 pandemic, as government restrictions and quarantine requirements grounded the travel sector.

For the three months to March 31, IAG posted a pretax loss EUR1.22 billion, narrowed from EUR1.88 billion in the first quarter of 2020, as total revenue dropped 79% to EUR968 million from EUR4.59 billion.

First-quarter passenger revenue was EUR459 million, down 88% from EUR3.95 billion a year ago. IAG said it generated EUR350 million in revenue from cargo-only flights, which is a first-quarter record.

Looking ahead, IAG said it won't be issuing profit guidance for 2021 due to uncertainty over travel restrictions. It noted it has EUR10.5 billion in liquidity and good access to capital markets.

The carrier also called on government action for flights to be able to return to the skies, pointing to four measures required. These include, travel corridors without restrictions between countries with successful vaccination rollouts and effective testing such as the UK and the US.

IAG also called for affordable, simple and proportionate testing to replace quarantine and costly, multi-layered testing. It wants well-staffed borders using contactless technology including e-gates to ensure "a safe, smooth flow of people and frictionless travel".

IAG also said digital passes for testing and vaccination documentation would be helpful to facilitate international travel.

However, so-called 'vaccine passports' have drawn criticism from sceptics due to privacy, fairness and ethical concerns.

"These measures will enable a safe re-opening of our skies. Travel underpins a global industry that supports 13 million jobs in Europe alone. There's a high level of pent-up demand and aviation will play a critical role in reconnecting people and getting economies back up and running again," said IAG Chief Executive Officer Luis Gallego.

Fellow travel firm InterContinental Hotels Group said trading continued to improve during the first quarter of 2021 and that it was seeing a strong performance in openings and signings.

For the three month to March 31, revenue per available room, a key metric in the hotel industry - was down 50.6% from 2019 and down 33.7% versus 2020.

IHG noted there was a notable pick-up in demand in March, particularly in the US and China, which continued into April.

In Greater China, after temporary domestic travel restrictions were lifted, demand recovered quickly in March towards levels seen in the second half of 2020, IHG added.

"Trading continued to improve during the first quarter of 2021, with IHG maintaining its outperformance of the industry in key markets and seeing strong performance in openings and signings as we expand our brands around the world...While the risk of volatility remains for the balance of the year, there is clear evidence from forward bookings data of further improvement as we look to the months ahead," said CEO Keith Barr.

"We opened a further 56 hotels during the quarter, and these new openings broadly offset hotels removed as part of our continued focus on maintaining the highest quality estate for our guests. Linked to this, we are making good progress on our review of the Holiday Inn and Crowne Plaza estates. Our pipeline grew with 92 signings in the quarter, driven by our industry-leading midscale brands and continued strong owner appetite for conversion opportunities, particularly in our Premium and Luxury & Lifestyle categories," Barr added.

Funds managed by Sherborne Investors have sold their entire 6.0% stake in Barclays. This would be worth around GBP2.54 billion at Thursday's closing price for Barclays.

Sherborne said it believes that the risk of and rewards from a new investment opportunity that it has identified offers a better return to its shareholders than a continuing investment in Barclays, and it has started buying securities of the undisclosed target company.

The Japanese Nikkei 225 index ended up 0.1% on Friday. In China, the Shanghai Composite was down 0.2%, while the Hang Seng index in Hong Kong was down 0.3%.

Chinese service sector business activity signalled a sharp expansion in April, data from Caixin showed, supported by the strongest rise in overall new work for five months.

The headline seasonally adjusted business activity index increased to 56.3 points in April from 54.3 in March. The upturn was the strongest recorded in 2021 to date and quicker than the series average of 54.1 points.

Separately, China's General Administration of Customs said the country's total import and export value was CNY11.62 trillion, about USD1.799 trillion, in the first four months of 2021, a year-on-year increase of 29%.

Exports were CNY6.32 trillion, a 34% jump on a year earlier, while imports were CNY5.3 trillion, an increase of 23%. The trade surplus was CNY1.02 trillion, more than doubled year-on-year.

"With Asia markets having a decent session, today's European open is expected to follow suit with a positive open in the wake of the latest China trade data, with the main focus on the US jobs numbers for April," said CMC Markets analyst Michael Hewson.

The Japanese services sector continued to head towards stabilisation in April, according to survey results reported by IHS Markit.

The seasonally adjusted Japan services business activity index rose to 49.5 points in April from 48.3 in March. The figure was below the 50.0 threshold that separates growth from decline, but it was the slowest contraction in activity in the current 15-month period of decline.

The latest reduction was only modest overall, as firms faced softer restrictions in the first half of April, Markit noted.

The pound was quoted at USD1.3900 early Friday, up from USD1.3876 at the London equities close Thursday.

Hopes of a Labour party revival under Keir Starmer suffered a blow on Friday after the Conservative party comfortably won the Hartlepool by-election for the UK Parliament.

The Leave-supporting North East constituency went blue for the first time in its 47-year-old history, as UK Prime Minister Boris Johnson demolished another brick in Labour's so-called "red wall".

Voters in the town backed Tory candidate Jill Mortimer to be their next member of Parliament over Labour's Paul Williams – an avid Remainer and second-referendum campaigner during his time as MP for Stockton South between 2017-19 – in a rare by-election victory for a party in power for more than a decade.

The Conservative, who declared it a "truly historic result", secured a 6,940 majority winning 15,529 votes to Williams's 8,589.

Following the Hartlepool declaration, attention will turn to results elsewhere as ballots continue to be counted across England, Scotland and Wales in the largest test of political opinion outside a general election.

Results from the Holyrood election – where the issue of Scottish independence was a main feature in the campaign – will come through later on Friday and Saturday. Scottish National Party leader Nicola Sturgeon's push for a second independence referendum means the stakes are high in the contest.

The euro was priced at USD1.2065, up from USD1.2053 late Thursday. Against the yen, the dollar was trading at JPY109.06, flat from JPY109.09.

Brent oil was quoted at USD68.43 a barrel Friday morning, up from USD68.39 late Thursday. Gold was quoted at USD1,819.25 an ounce, higher against USD1,813.85.

Friday's economic calendar also has UK construction PMI at 0930 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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