FTSE 100 steady as Amazon numbers help lift the mood, NatWest rocked by profit downgrade, British Airways owner reports strong third quarter but market concerned about outlook

“The FTSE 100 was steady despite more selling in the US overnight as a positive after hours update from Amazon helped improve the market’s mood,” says AJ Bell Investment Director Russ Mould.

“A steady performance from the e-commerce and, particularly, the AWS cloud business helped reassure investors. AWS is the real profit engine of the group and there was a risk an uncertain economic backdrop might have affected demand from clients. Solid sales and margins here will therefore be positively received.

“Later on the market will be watching the US Federal Reserve’s preferred measure of inflation – personal consumption expenditures – ahead of its next meeting to decide interest rates on 1 November.”

Natwest

“The details of NatWest’s third quarter results may initially have been pushed into the background by admissions of failure over its treatment of Nigel Farage.

“An independent review found shortcomings in decision-making and communication, and it comes at a point where market conditions are becoming less favourable."

“Investors didn’t take long to turn their attention to an equally damaging profit downgrade. Guidance on the net interest margin has been lowered as any benefit from higher interest rates seems to be evaporating.

“Competition for savings and mortgage products, coupled with some regulatory pressure, means the banks are no longer seeing such a big gap between what they charge on borrowings compared with what they pay out for deposits.

“While bad debts remain under control for now, the market is clearly wary of a deterioration here as the pressures on households and businesses continue to mount.

“Higher interest rates have not been the panacea for the sector that some might have hoped, with NatWest shares notably trading below the level they traded at before the current rate hiking cycle began.”

International Consolidated Airlines

“British Airways owner International Consolidated Airlines’ third quarter numbers were pretty stellar as it beat forecasts thanks to a summer of heavy demand.

“If the first post-Covid summer season in 2022 was something of a damp squib thanks to airport disruption, this time round the recovery in the airline space has been truly impressive.

“The question now is: is this as good as it’s going to get? People have clearly been using what disposable income they do have on holidays and have stomached a significant increase in the price tag for jetting away after the pandemic prevented them from doing so.

“However, there must be limits to households’ capacity to keep spending at the levels we’re seeing right now and events in the Middle East are once again pushing up crude oil prices, feeding into a higher cost of fuel. Not to mention that geopolitical tensions often have a negative impact on the travel sector in of themselves.

“When you add concerns about IAG’s debt position to the mix, it’s easy to see why today’s update got raspberries rather than garlands from the market.”

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