BA owner makes first profit since pandemic, and Apple and Amazon beat expectations

“The FTSE 100 continued to grind upwards on Friday morning, putting it on course to end a pivotal week in positive territory,” says AJ Bell investment director Russ Mould.

“With many of the big US names reporting this week and the Federal Reserve delivering its latest decision on rates this always felt like a make or break week and fragile markets have just about emerged intact.

“It says something about the looking glass nature of investing right now that seemingly bad news in the shape of the US meeting the technical conditions for a recession - even if the ultimate arbiter the National Bureau of Economic Research is still to deliver its verdict - is seen as a positive development as it might lead the Fed to ease back on rate hikes.

“Also helping sentiment was good news from Amazon and Apple, with both managing to deliver better-than-expected sales despite rising prices and a weakening consumer outlook.

“It suggests that, for now at least, these elite companies are sufficiently ingrained in the everyday lives of their customers to keep demand sticky, and their awesome buying power is sparing them from some of the pain felt by others on rising costs.

“Drug maker AstraZeneca is something of a stock market rarity right now - a company trading at fresh record highs in 2022. But it appeared to fall victim to profit taking this morning as it beat expectations for the second quarter and raised its full-year guidance, yet got only raspberries in response from investors.”

NatWest

“In a mixed UK bank reporting season so far, there’s no question who is getting the gold star.

“NatWest has knocked it out of the park with its latest results. It’s hard to see what more it could have done to impress the market.

“Profit ahead of expectations: check. Big shareholder returns: check. Raised guidance: check. It all adds up to suggest that rising rates are helping to boost the profitability of the group.

“NatWest moved to majority private ownership earlier this year and, whether coincidence or not, these results imply the long, slow rehabilitation process post the Great Financial Crisis may be nearing its conclusion under current chief executive Alison Rose.

“If NatWest can keep this sort of momentum up, the Government will be glad it extended the deadline for the final sale of its shareholding by 12 months to August 2023.

“There will likely be significant obstacles along the way given the clouds hanging over the UK economy, but the business at least looks in decent shape to take on these challenges.”

International Consolidated Airlines

“British Airways owner International Consolidated Airlines may have returned to profit for the first time since the start of the pandemic but that doesn’t mean the turbulence is over for the business. The threat of industrial action, the many cancellations and pressures on consumer spending are all affecting visibility on future growth.

“It is perhaps no surprise that demand is proving durable for air travel given it was denied to people by covid restrictions for so long.

“However, customers’ ability to splurge by jetting off on holiday is finite and there has to be a risk that a bumper, if disrupted, 2022 summer season becomes difficult to emulate going forward.

“That is particularly true when you consider how many passengers may have been alienated by last-minute cancellations and significant disruption at airports.

“For now IAG’s take is that there are no signs of weakness in demand. Significantly for the company there has been a steady recovery in business travel, suggesting widespread video conferencing may not, in fact, mark the death knell for travelling for work.

“Over the longer term IAG and the rest of the aviation industry also face the challenge of addressing their contribution to climate change after a summer which has brought home some of the consequences of our warming planet.

“Perhaps understandably this isn’t top of the agenda for management right now but they cannot afford to neglect it entirely if they are going to have a sustainable future.”

These articles are for information purposes only and are not a personal recommendation or advice.