Travel and leisure weighs on European stocks

Europe

It’s been a cautious session for markets in Europe, with investors becoming ever more reticent heading into the weekend, as well as tomorrow’s US CPI report for November. The risk of tighter restrictions due to Omicron appears to be tempering risk appetite, after the early gains of this week.

The new restrictions announced across England last night while largely expected are still bad news for the hospitality sector, with weakness in the likes of All Bar One owner, Mitchell and Butlers, Wetherspoons, and Wagamama’s owner The Restaurant Group.

Cineworld is also lower over concerns the new mask mandate might put some people off going to the big screen.

Airlines are also lower led by IAG, Wizz Air and easyJet, as uncertainty over Omicron once again tempers demand.

Rolls Royce shares have slipped back despite a decent Q3 trading update, with cashflow turning positive in Q3. Unfortunately, investors appear unable to look past concerns about the return of international travel, and the company’s ability to see an uplift in EFH back to more sustainable levels, with the share price slipping back. .

Go-Ahead Group, the company that runs Thameslink and the Southern rail franchises has seen its shares plunge as it grapples with the fallout of the pandemic and a failure to repay £25m in taxpayer cash. The company which was stripped of the Southeastern franchise in September said it would not be able to file its accounts by January 3rd because of fines in relation to this failure to repay the money.

It is also having problems with its rail services in Norway and Germany largely due to lower passenger numbers.

On the plus side, packaging company DS Smith was amongst the better performers after reporting a 16% rise in half year revenue to £3.36bn, and an 80% increase in profits before tax to £175m, however these gains proved to be rather short-lived. A large part of the improvement was down to its US business which saw a 64% rise in operating profits. Supply chain costs and higher pricing were headwinds however this was offset by higher selling prices.

BT Group is also higher, perhaps on an expectation that we could see further bid talk in the lead-up to Christmas.

US

US markets look set to open lower, ahead of today’s weekly jobless claims numbers and tomorrow’s CPI report. 

GameStop shares have fallen sharply after reporting a bigger than expected Q3 loss of $1.39c a share, although revenues beat expectations, coming in at $1.3bn. The company declined to provide an outlook, while also saying they had received a SEC subpoena on its share trading activity. The business is in the process of reorientating its business model towards online and away from bricks and mortar. 

There also in focus ahead of its Q3 numbers which are due out after the bell. In Q2 losses came in at $0.76c a share. More worryingly revenues were down on Q1, which means it’s not enough to just cut costs to sustain a tired business model, revenues need to increase as well, and they aren’t. Will we see a better outcome in Q3?

FX

The broader risk off mood today is boosting the Japanese yen on the margins, while the US dollar is also edging higher against a broad range of other currencies with the biggest gains against the Norwegian krone and Australian dollar.

The pound is also struggling, largely on the back of the real probability now that the Bank of England will hold fire next week, though this prospect disappeared more than a week ago, when news of the Omicron variant first hit the headlines, giving the central bank the opportunity to do what it does best, nothing.

While the pound is struggling, the euro is finding an element of support even though virus data coming from mainland Europe looks even worse, as Delta continues to take its toll.

Commodities

Crude oil prices are on the back foot on the back of this morning’s weakness in equity markets, retreating from their highest levels since the post-Thanksgiving sell-off.