lAG shrugs off £6bn loss, as European markets pull back from their lows

European markets opened sharply lower this morning after Asia markets followed on from the plunge in US stocks last night, by also plunging sharply with the Nikkei 225 closing at a three-week low.

The after effects of the sharp spike in bond yields in the last 24 hours, continues to be felt as we head towards the end of the week and the month, as investors adopt a risk off approach, with the US dollar rising across the board, with the exception of the Japanese yen, which is also acting as a haven.

One thing the sharp move higher in bond yields has done, is prompt some buyers back into the market, with US treasuries embarking on a bit of a rebound, as yields start to fall back a touch from their recent highs.

Theis decline in yields is helping to pull stocks off their lows of the day, however we are still seeing declines in the commodity prices from their recent peaks which is translating into some weakness in basic resources and the oil and gas sector. This in turn is translating into declines for the likes of BP and Royal Dutch Shell, as well as the likes of Glencore and Anglo American.

Even some of the biggest beneficiaries of the reopening trade are seeing some profit taking this morning, with losses for the likes of British Land and Land Securities. This morning’s declines are also taking in the likes of Just Eat Takeaway, however in the context of the safe haven theme we’re seeing gains for utilities and the health care sector. Hikma is reversing some of its losses from yesterday, while AstraZeneca is also higher.  

Despite opening lower this morning British Airways owner IAG, which this morning announced a £6bn loss, has seen its shares turn around and is now showing some gains.

All in all, while these numbers are undoubtedly bad, they aren’t surprising either, given the damage wrought on the airline sector by the pandemic. IAG’s biggest problem however is not a pickup in passengers on an economic re-opening. It will be able to benefit from the return of domestic passengers like its smaller peers EasyJet and Ryanair.  

Its main problem will be getting the same levels of long-haul business travel that it had before the pandemic. This is where most big carriers make their money, and it is here that normal service may well take a little longer to return to the same levels they were in 2019.

Property website Rightmove this morning announced that it was resuming its dividend, with a payment of 4.5p per share, as well as its share buyback program, despite seeing profits decline to £134.8m from £213.5m the year before.

Average revenues per advertiser which initially took a hit in the immediate aftermath of the first lockdown has been slowly recovering month on month.

Pets at Home, another business that has done well from the pandemic announced a continued strong performance in Q4, as well as upgrading its full year outlook for profit to come in at £85m, up from £77m.

RSA Insurance Group’s full year profits showed a small decline in 2020, due to a fall in total income from £6.9bn to £6.55bn, largely due to the impact of Covid-19. The group paid out £4.6bn in normal claims, while providing £250m in Covid-9 specific claims. Management took the decision to withhold a final dividend for 2020, in order to conserve cash until the company’s acquisition by Intact is completed.

A rebound in the US dollar along with chatter that calls are growing within OPEC+ for the oil production curbs that have been in place, to be relaxed at next week's meeting has seen oil prices start to slide back, having hit thirteen-month highs earlier this week.

The pound is getting a bit of a kicking this morning, though in light of recent gains it was perhaps inevitable it would get caught up in some of the concerns, over rising inflation and yields given UK gilt yields have also jumped sharply. We could well see further weakness in the short term, however the long term prognosis still remains positive despite the losses of the last couple of days.

Last night’s plunge in US markets saw the Nasdaq post its biggest one day fall since October, sliding 3.5%, however there is some evidence that we may see a bit of a rebound for when US markets reopen later today.

Beyond Meat posted its latest Q4 numbers after the close with net revenues falling short of expectations, coming in at $101.9m, and posting a bigger than expected loss of $0.34c a share. While disappointing, this news was overshadowed by the subsequent revelation that the company was signing a three-year deal with McDonalds for the McPlant, as well as signing a deal with Yum Brands to co-create a range of other plant-based items, sending the shares sharply higher in after hours trade.

Airbnb’s first quarterly numbers as a publicly listed company showed Q4 revenues that were better than expected, coming in at $859m, above estimates of $739.7m. This was still a 22% decline on the year before but also showed that demand was more resilient than feared. The company still posted a net loss of $3.9bn due to associated costs arising from the IPO, however the outlook remains positive especially with a vaccine rollout gathering pace. People who want to travel prefer to avoid hotels which have communal areas, and look for a more contained experience, where there is an element of privacy.   

First Solar, a company that makes solar panels that are primarily used in solar farms, also posted a profit in its Q4 numbers, though they fell short of expectations as well as falling short on revenues. On the plus side it was much more optimistic about its 2021 performance, with 2021 profits expected to come in well above its previous estimates of $3.68c a share, with renewed guidance of $4.05 to $4.75c a share.  

Dow Jones is expected to open 45 points higher at 31,447.

S&P500 is expected to open 16 points higher at 3,846.