FTSE up as US big hitters poised to report today, Unilever feels the Nelson Peltz effect, and Easyjet hit by travel chaos

“The FTSE 100 made some modest progress on Tuesday morning as earnings reports on both sides of the Atlantic turn from a trickle to a flood,” says AJ Bell Investment Director Russ Mould.

“Some really big hitters report in the US later today, including Coca-Cola, McDonalds as well as Microsoft and Alphabet.

“These could really define an earnings season which, up until now, has been pretty resilient given the backdrop.

“Another defining moment this week comes with tomorrow’s decision on US interest rates. How hard will the US Federal Reserve push – will it serve up another 75 basis point rise as is widely expected? Or will it dial back a touch?”

Unilever

“It is early days but perhaps the Nelson Peltz effect is already at play at consumer goods giant Unilever.

“The billionaire activist was only added to the board a matter of months ago but already Unilever seems to be getting a better hearing from the market.

“Just as in the first three months of the year, the trend for rising prices to be met by falling volumes has continued.

“Consumers trading down to cheaper alternatives is an obvious risk for Unilever but, rather than trying to compete on price, the company is better off protecting itself from inflationary pressures by testing its pricing power.

“In fairness the volume declines weren’t too alarming, suggesting its brands retain their hold over shoppers for now. Longer term, protecting the integrity of these brands by not compromising on quality to reduce costs is important.

“With Peltz on board, investors may have more confidence in a pretty bloated Unilever slimming down. This could streamline decision making and allow Unilever to be the best version of itself – and it certainly has some attributes which make it stand out including a strong footprint in emerging markets and decent returns on capital.”

Easyjet

“EasyJet may have flown 95% of its planned schedule in the three month period to the end of June but it’s the 5% which didn’t fly as planned which have been making the headlines.

“This is damaging to EasyJet’s image and could undermine a recovery in demand from holidaymakers keen to jet off for some summer sun.

“The company notes an improvement in July and says things have ‘normalised’ but presumably they and other relevant players like the airport operators thought they were all set earlier in the year and that proved not to be the case.

“Problems like shortage of labour aren’t going to disappear overnight. For now though it does look like people have been so starved of their week on the beach they’re prepared to put up with some disruption and higher costs.

“How long that can last when household budgets are under severe pressure is open to question. Maybe you can stick a summer break on the credit card this year and worry about paying it off when you’re back. However, that’s not sustainable beyond the short term.

“Signs that problems could be lasting were obvious from the Heathrow CEO’s comments this morning that it could take years for the airline industry to rebuild its resilience post the pandemic and news that British Airways pilots are poised to launch industrial action.

“There could be considerable turbulence to come for both EasyJet and the wider aviation sector’s recovery.”

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