FTSE slumps ahead of US inflation data, EasyJet to post third consecutive annual loss, mixed fortunes for gambling firms Rank and Entain

“The FTSE 100 was lower ahead of a crunch end to the five-day trading session which features the end of the Bank of England’s gilt-buying programme tomorrow and, later today, US inflation figures,” says AJ Bell Investment Director, Russ Mould.

“It feels like the markets are feeding hungrily on any scraps of good news and even the merest hint inflation is cooling would likely be taken as a sign that, despite the US Federal Reserve’s earnest protestations, the tide is about to turn on interest rates.

“Investors probably shouldn’t hold their breath given the trend in core inflation suggests higher prices are proving as sticky as toffee.

“The situation in the US is not as unhappy as in the UK where pension funds are scrambling to prepare for the withdrawal of liquidity support from the Bank of England on Friday – a race which is likely to have few, if any, winners.

“Pressure for further U-turns on the mini-Budget is only likely to build as gilt yields rise and sterling falls, and in the meantime the Bank’s insistence that the time-limited measures will be just that could face a severe test.”

Easyjet

“It speaks to how far the aviation sector has descended that EasyJet’s warning of a third consecutive annual loss was greeted with a shrug by the market.

“In theory, 2022 should have been the year the airlines really bounced back as pent-up demand from holidaymakers was unleashed.

“However, the airlines themselves as well as airports and other infrastructure proved not to be up to the task of dealing with a flood of returning passengers. EasyJet has suffered as disruption costs obscure the happier fact of capacity and passenger volumes getting closer to pre-pandemic levels.

“Looking forward, investors will take some comfort from commentary on resilient bookings for this winter and next summer.

“It suggests that even with limited discretionary spend, people are still prioritising jetting away. This may be the case for now but, particularly in the UK, pressures from rising mortgage costs and energy bills are only mounting and people may eventually become stretched beyond their limit, even when it comes to booking with a low-cost carrier like EasyJet.

“At least a recent improvement in cancellation levels means EasyJet should not sustain further damage to its brand and reputation from messing customers around.”

Rank / Entain

“There’s a saying that during tough times our appetite for betting increases. People feeling the pinch of a higher cost of living or gloomier economic conditions are often prepared to bet the remaining cash in their pocket in the hope of winning big on the horses, football or other sports or games.

“Thus, faced with the current miserable backdrop, one might expect gambling firms to be raking it in. The evidence suggests it’s not that clear cut.

“Rank runs casinos and bingo halls across the UK and is certainly not popping champagne bottles in terms of soaring earnings. More people might be visiting its Grosvenor and Mecca venues, yet they’re spending less. And outside of London, customer spending levels are noticeably weaker.

“Takings in Rank’s Spanish operations have shown much stronger gains but overall, there is a sense that the group may not see the heyday some might have expected.

“Entain is a more global beast, but it too hasn’t seen a large pick-up in net gaming revenue in its most recent quarter when looking at its online operations. However, its physical shops have seen more encouraging growth.

“The key thing stopping investors from panicking about sluggish overall progression for the business is the World Cup which kicks off on 20 November. Traditionally this attracts an elevated level of betting from sports fans, for many it might be the only gambling they do this year.”

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