European markets gain ground as recovery hopes overshadow US and Asian declines. Meanwhile, easyJet shares have lost another 15% as traders realise the struggles ahead for the airline.
- European markets kick off on positive footing.
- Japanese PPI highlights ongoing inflation pressures.
- EasyJet hit as airlines look towards potential consolidation.
European markets have kicked off the week on the right foot, with Friday’s US declines and overnight losses in Asia largely disregarded for now. While we are used to seeing US markets lead the way, there is a feeling that we could see greater catch-up for Europe as high vaccination levels keep deaths relatively stable. Today sees a relatively slow start to the week, with precious few economic releases of note. However, with key US and UK inflation data released over the coming days, the monetary policy outlook comes back into play once again. Soaring commodity prices show little sign of letting up, with aluminium the latest outperformer having hit the highest level since 2008. Overnight PPI data out of Japan hammers home the same message seen worldwide that producers are struggling under price pressures that show little sign of letting up. Thus while some central bankers will have you believe they are happy to hold back on tightening for now, we are seeing very clear signs that this spike in inflation is far from fleeting.
It hasn’t been an easy ride for easyJet investors over the past week, with the airline down 27% since Wednesday’s peak. The airline is on the back foot once again today, with a 15% decline in early trade coming off the back of Friday’s UBS comment that they are likely to lag behind in their recovery. With the sector clearly under pressure over the course of this pandemic, laggards do run the risk of being swallowed up by more successful competitors. The Wizz Air takeover attempt of easyJet does highlight how many see the airline as an easy target that is going through a tough time. Michael O’Leary sees the need for consolidation throughout the industry, and thus smaller carriers are likely to find themselves as targets for cut-price takeover attempts as larger firms seek to scale up.
Ahead of the open we expect the Dow Jones to open 142 points higher, at 34,750.