LONDON MARKET PRE-OPEN: easyJet sees demand soften amid Omicron worry

(Alliance News) - Monday's rally may prove to be short-lived, with stocks in London set for ...

Alliance News 30 November, 2021 | 7:56AM
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(Alliance News) - Monday's rally may prove to be short-lived, with stocks in London set for another tumble on Tuesday on renewed worries over the Omicron Covid-19 variant and the possibility it could evade vaccines.

"It will likely be a couple of weeks before the great and good of the global scientific community can make a definitive judgement on how serious the omicron variant is. That means December is likely to be choppy and driven by Omicron headlines," said Jeffery Halley, senior market analyst at Oanda.

In early UK company news, easyJet said it is too early to call the impact of Omicron on the travel sector but noted some "softening" in trading for the first quarter. Publisher Future raised its guidance for the 2022 financial year. Pub chain Marston's reported encouraging current trading, but tempted fate by saying it believes "the worst of the pandemic is now behind us".

IG says futures indicate the FTSE 100 index of large-caps to open 76.95 points, or 1.1%, lower at 7,033.00 on Tuesday. The FTSE 100 index rose 65.92 points, or 0.9%, at 7,109.95 on Monday, staging a partial rebound from Friday's 3.6% slump.

The World Health Organization has said the overall risk from Omicron is "very high" and warned that any major surge would put pressure on health systems and cause more deaths.

"If another major surge of Covid-19 takes place driven by Omicron, consequences may be severe," the WHO cautioned, concluding that "the overall global risk related to the new [variant of concern] Omicron is assessed as very high."

While US President Joe Biden said the strain is "not a cause for panic", Federal Reserve Chair Jerome Powell said that Omicron could slow the recovery of the US economy and labour market, and heighten uncertainty regarding inflation.

"The recent rise in Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity, and increased uncertainty for inflation," Powell said, in comments to be delivered to the Senate Banking Committee on Tuesday.

The dollar was on the back foot on Tuesday amid speculation the new variant will push back the Fed's plans to tighten US monetary policy.

Sterling was quoted at USD1.3318 early Tuesday, firm on USD1.3305 at the London equities close on Monday.

The euro traded at USD1.1320 early Tuesday, higher compared to USD1.1270 late Monday. Against the yen, the dollar fell to JPY113.09 versus JPY113.70.

Gold, considered a safe-haven asset, advanced amid the renewed caution, while oil prices tumbled on concern about reduced demand.

Gold was quoted at USD1,792.09 an ounce early Tuesday, higher than USD1,783.85 on Monday. Brent oil was trading at USD71.49 a barrel, dropping from USD73.88 late Monday.

In early UK company news, easyJet said its full-year loss beat market consensus expectations, and it remained confident in a return to pre-virus capacity towards the end of its new financial year, despite Omicron uncertainty.

For the financial year that ended September 30, revenue halved to GBP1.46 billion from GBP3.01 billion the year before. easyJet's pretax loss narrowed to GBP1.04 billion from GBP1.27 billion on a reduction in finance charges.

The airline's headline pretax loss widened to GBP1.14 billion from GBP833 million, but it highlighted that this result was ahead of consensus.

"Having delivered FY21 ahead of consensus, we have seen an encouraging start to this year with strong demand returning for peak winter holiday periods, coupled with increasing summer demand with Q422 capacity expected to be close to FY19 levels," said Chief Executive Johan Lundgren.

On the new Covid-19 variant, easyJet said it is too soon to say what impact Omicron will have on European travel, though added it is prepared for "periods of uncertainty". While easyJet has seen some "softening" of trading for the first quarter, it is still seeing solid bookings for the second half.

Capacity in the first quarter is expected to be around 65% of pre-virus levels, with a load factor in excess of 80%. Second-quarter capacity is expected to be increased further, to around 70%, before reaching close to pre-pandemic levels by the final quarter.

"In summary, we remain mindful that many uncertainties remain as we navigate the winter, but we see a unique opportunity for easyJet to win customers and take market share from rivals in this period," said Lundgren.

Magazine publisher Future boosted its dividend and said it now expects results for 2022 to be ahead of current forecasts.

For the financial year that ended September 30, revenue jumped 79% on the year before to GBP606.8 million, while pretax profit doubled to GBP107.8 million from GBP52.0 million.

Organic revenue grew 23%, with this trend accelerating in the second half. US organic revenue growth was 27% while the UK notched 17% growth.

Future, confident in its outlook, proposed a dividend for the year of 2.8p per share, up 75% on the 1.6p paid out the year before.

Looking ahead, Future expects growth to accelerate in the second half of its 2022 financial year and now expects adjusted results for the financial year ahead to be "materially above current expectations".

"We expect our operating model to drive enhanced scalability and operating leverage, leading to further margin expansion, and we are therefore upgrading our outlook for the full year," said Chief Executive Zillah Byng-Thorne.

Wolverhampton-based pub chain Marston's looked to put a pandemic-disrupted period behind it and focus on strong trading since the lifting of virus restrictions.

Revenue for the year to October 2 from continuing operations dropped to GBP401.7 million from GP515.5 million. Still, Marston's managed to narrow its loss to GBP171.1 million from GBP388.7 million as operating expenses dropped.

The full-year result was disrupted by the pandemic, Marston's said, highlighting that like-for-like sales since restrictions lifted in July were up two-fold on 2019.

Current trading is encouraging, it added, with total like-for-like sales growth 1.3% versus 2019 despite a reduction in VAT relief. Christmas bookings are in line with 2019 and it has long-term contracts in place to manage 2022 inflation headwinds.

"Looking forward, we believe the worst of the pandemic is now behind us, albeit we will have to navigate through the coming winter months if any further Government restrictions are put in place," said Marston's.

Payments firm Wise lifted its revenue growth guidance. Revenue for the half-year to September 30 rose 33% to GBP256.3 million from GBP192.2 million year-on-year. However, pretax profit slipped 6.0% to GBP18.8 million from GBP20.0 million as administrative expenses grew.

The international money transfers operator now expects annual revenue growth to be in the mid-to-high 20s on a percentage basis, up from guidance of low-to-mid 20s previously.

"Over the first half of this year we've improved our products and engineered away substantial points of friction in the payments process, enabling us to sustainably lower prices while continuing to invest in growing the business for the long term," said Co-Founder & Chief Executive Kristo Kaarmann.

In the US on Monday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.7%, the S&P 500 up 1.3% and the Nasdaq Composite up 1.9%.

However, this momentum failed to carry through to Asia.

The Japanese Nikkei 225 index dived 1.6%, though the S&P/ASX 200 in Sydney closed up 0.2%.

In China, the Shanghai Composite ended flat, while the Hang Seng index in Hong Kong was 1.7% lower.

Manufacturing activity in China edged up in November on the back of an easing in power shortages and a drop in some raw material costs, official data showed Tuesday.

The purchasing managers' index – a key gauge of manufacturing activity – in the world's second-biggest economy rose to 50.1, returning above the 50-point mark separating growth from contraction after two months. The latest data from the National Bureau of Statistics was also better than a 49.7 reading expected by a Bloomberg poll of analysts.

The economic events calendar on Tuesday has German unemployment data at 0855 GMT and eurozone inflation readings at 1000 GMT.

By Lucy Heming;

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Marston's PLC 79.40 GBX 1.66 -
easyJet PLC 603.20 GBX 1.41
Future PLC 3,040.00 GBX 1.33 -
Wise PLC Class A 604.00 GBX -0.20 -

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