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LONDON MARKET OPEN: Airline shares fly on upbeat easyJet update

Stock prices in London opened in the green on Thursday, with some positive corporate updates helping lift the FTSE 100, a far cry from the sell-off New York tech shares suffered overnight.

The tech sector comes into focus again, with streaming service Netflix, traditionally one of the FAANG stocks alongside Facebook owner Meta, Amazon, Apple and Alphabet, reporting quarterly earnings later.

The FTSE 100 index opened 42.60 points higher, 0.5%, at 7,890.59. The FTSE 250 was up 50.21 points, 0.3%, at 19,390.35. An early wave of corporate trading statements from mid-caps were mixed, though it did have some M&A impetus, as Hipgnosis Songs Fund agreed to a takeover.

The AIM All-Share was up 0.57 of a point, 0.1%, at 743.69.

The Cboe UK 100 rose 0.4% to 787.94, the Cboe UK 250 was flat at 16,789.50, and the Cboe Small Companies was largely unmoved at 14,767.32.

In European equities on Thursday, the CAC 40 in Paris rose 0.5% and the DAX 40 in Frankfurt added 0.2%.

The Dow Jones Industrial Average ended down 0.1% in New York on Wednesday. The S&P 500 fell 0.6%, while the Nasdaq Composite slumped 1.2%.

Earnings from Amsterdam-listed ASML disappointed, sending chipmakers in New York lower.

‘The results raised a few eyebrows regarding the sustainability of demand from chipmakers and the future of the AI rally. As such, Nvidia – which has become the icon of the AI rally – fell nearly 4%,’ Swissquote analyst Ipek Ozkardeskaya commented.

On Thursday, Taiwan Semiconductor announced a nearly 9% increase in net profit in the first quarter of 2024.

TSMC - whose clients include Apple and Nvidia - controls more than half the world’s output of silicon wafers, used in everything from smartphones and cars to missiles.

Net profit increased 8.9% on-year in January-March to NT$225.4 billion, around $6.97 billion, compared to NT$206.9 billion in the same period last year.

Some of the dollar’s progress this week eased on Thursday morning. The greenback has been supported by the expectation that the Federal Reserve’s first rate cut of the cycle will come later than initially expected.

Though was once hope that the first cut could have come as early as March, though that did not materialise. Another hold in May as all but certain, and the odds of a June cut have dwindled to as low as 17%, from over 50% a month ago, according to the CME FedWatch Tool.

At the moment, a September Fed cut is the best bet, according to the tool.

Against the dollar, sterling rose to $1.2478 early Thursday, from $1.2447 late Wednesday. The euro was up at $1.0687, from $1.0637. Against the yen, the buck bought JP¥154.19, down from JP¥154.67.

The UK is also grappling with sticky inflation, numbers showed Wednesday. According to the Office for National Statistics, the UK consumer price inflation rate was a touch loftier than expected last month, though it cooled to its tamest level since September 2021.

The ONS said the year-on-year rate of consumer price inflation ebbed to 3.2% in March, from 3.4% in February.

Commerzbank analyst Michael Pfister commented: ‘It seems that the UK also has a bit of an inflation problem. While the US figures are understandably more in the spotlight at the moment, yesterday’s UK figures showed quite clearly that disinflation has stalled here as well. In fact, the figures surprised on the upside across the board, with the seasonally adjusted monthly rate of change for the core rate ending up just above the average for the last 10 months.

‘With each passing month, it becomes clearer that while the core rate is likely to fall slightly on a year-on-year basis (probably to 3.4-3.5% in the next two months on base effects alone), not much more is expected thereafter. This should make it very difficult for the Bank of England to cut rates significantly in the near future.’

Stocks in Asia were higher. The Nikkei 225 rose 0.3% in Tokyo. In China, the Shanghai Composite added 0.1%, while the Hang Seng in Hong Kong was up 1.0% in late trade. The S&P/ASX 200 climbed 0.5%.

A barrel of Brent oil slumped to $86.72 early Thursday from $88.68 late Wednesday. Gold traded at $2,375.34 an ounce, down from $2,383.47.

In London, easyJet shares rose 3.9%. It reported a ‘positive outlook’ for the remainder of its financial year, and said its ‘seasonal’ losses eased in the first half.

In the six months to March 31, revenue surged 22% to £3.27 billion from £2.69 billion. Its headline pretax loss slimmed to £350 million from £411 million.

‘Easter demand was particularly strong, benefitting March due to its early timing. Operational performance was good with peak daily flights broadly in line with summer levels,’ it said. ‘Bookings for summer 2024 continue to build well, with an increase in volume and pricing compared to the same period last year, underpinned by strong demand for easyJet’s primary airport network.’

Chief Executive Johan Lundgren said the firm is ‘well set up operationally’ for the upcoming summer season.

Shares in British Airways parent International Consolidated Airlines Group added 3.4% in a positive read-across.

National Grid added 2.6%. It raised its guidance for underlying earnings per share, following an accounting change.

The London-based electricity infrastructure and gas utility company said the reporting change will be reflected in its financial 2024 results, which will lead to an expected increase to underlying EPS of around 8p per share.

As a result, National Grid expects underlying earnings per share for financial 2024 to be line with its prior year. The company’s financial year ended March 31.

In financial 2023, National Grid reported underlying EPS of 69.7p.

Elsewhere in the utilities space, SSE added 2.1%.

Hipgnosis Songs Fund jumped 31%. The company agreed to a $1.40 billion takeover from music rights acquirer Alchemy Copyrights, which trades as Concord.

Concord will pay $1.16, or £0.932, in cash per Hipgnosis share. The price is a 32% premium to its Wednesday closing level.

Concord said Higpnosis Songs Fund shareholders will stand to receive an extra $25 million in total, if the investment adviser deal with Hipgnosis Song Management is ended. HSM is chaired by Merck Mercuriadis, who also founded Hipgnosis Songs Fund. Hipgnosis Songs Fund has at loggerheads with Mercuriadis.

The dispute was sparked by an arrangement, later rejected by Hipgnosis Songs Fund shareholders, to sell part of the fund’s portfolio to a joint-venture between Hipgnosis Songs Management and private equity firm Blackstone.

Dunelm fell 4.8% as it backed guidance but noted tough homewares market conditions.

Total sales in the third-quarter to March 30 rose 3% year-on-year to £435 million. It expects full-year pretax profit to be ‘broadly in line with market expectations’, citing consensus of £202 million, which would be up 4.7% from £193 million in financial 2023.

Centamin fell 3.9% as it reported ‘slightly lower production year-on-year’. The gold miner has interests in Egypt, Burkina Faso and the Ivory Coast.

It noted the ‘scheduled processing of lower-grade ore from the open pit, alongside the planned underground ventilation upgrades and mill maintenance’ in the first-quarter hit output.

Gold output declined 1.0% on-year to 104,821 ounces. Revenue for the period was 6.9% lower at $191.0 million from $205.2 million.

It left its 470,000 to 500,000 ounces output target for the year unmoved.

Elsewhere in London, LBG Media, which owns the Ladbible news and entertainment and viral video site, shot up 5.9%. It hailed a positive outlook stateside.

It said revenue in 2023 rose 7.5% to £67.5 million from £62.8 million in 2022. Its pretax profit, however, fell 19% to £5.9 million from £7.3 million.

LBG added: ‘Our positive revenue momentum and platform for growth in the US leaves the group at a significant juncture in its evolution and provides a clear line of sight to achieving £200 million of revenue. We have made a good start to 2024, entering our second quarter with positive momentum.’

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