- British Airways owner IAG sees record first half profit as travel demand remains strong
- FTSE 100 opens broadly flat after US market declines and earnings season dials down
- Europe remains mixed after in-line ECB rate decision
- Brent Crude rises to $84 a barrel
- AstraZeneca plugs gap left by falling COVID 19 sales
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
“British Airways owner IAG has seen first half underlying operating profit soar, putting the losses of last year firmly in the rear-view mirror. Leisure demand is said to be holding up, with bookings for the summer season at healthy levels. Investors should also be celebrating the fact that capacity is almost fully restored to pre-pandemic levels, which gives the airline group the best chance of capitalising on demand. At the same time, there are things to monitor. First and foremost is the risk, and cost, of disruption outside the group’s controls. It’s also important to consider that the outlook for business demand is murkier than leisure, and this corner of the market is a lot more important to IAG than it is for the likes of easyJet. As consumer sentiment potentially weakens towards the end of this year, it’s also possible that the likes of BA may see the rate of bookings slow. IAG has done an awful lot to get itself out of a downwards spin, and is now on an even keel, but unfortunately as far as mapping demand goes, it’s not out of the woods.
New data showed the US economy grew more than expected in the second quarter, throwing some water on the idea that the Federal Reserve’s about to end its hiking cycle. This led the Dow Jones Industrial Average to break an impressive winning streak, and sentiment is also being quashed on the FTSE 100 in response, with only very minor gains at the open. Markets are also facing a brief relief as the flurry of earnings slows a little for the traditionally quieter Friday. The more resilient economic data from across the pond has also seen treasury yields spike.
More broadly, Europe is looking at a mixed open too. Regional shares rallied on Thursday following the expected 25 basis point rate hike from the ECB, which also hinted at a possible pause in its tightening plans. Ultimately, markets are continuing to assess the benefits of a growing economy against the depth of the cuts to consumer sentiment and spending which will be triggered by the higher rate environment.
Brent crude continues its upwards march, now sitting at $84 a barrel, as supply concerns mount and a perkier outlook from China on the demand front squeeze the price in one direction.”
Derren Nathan – head of equity research at Hargreaves Lansdown
“AstraZeneca’s more than filled the $2bn hole left from declining COVID 19 sales in the first half of this year, with total revenues up by 4% to $22.3bn. Its robust portfolio of speciality medicines is serving it well and the biggest revenue line, cancer treatments, was also the fastest growing, up 22%. As these are some of Astra’s most profitable products it’s driving gross margins up. This helped push core operating profit up 20% to $8.2bn, although a fair chunk of this came from the renegotiation of how Astra splits the proceeds of sales from Beyfortus for the treatment of lower respiratory tract disease in infants.
Whilst the first half landed ahead of analyst estimates, the dividend has been held flat and there’s been no upgrade to guidance. Turning to the development pipeline, cancer treatments are again high on the agenda. The valuation has taken a knock of late following inconclusive late stage read outs for lung cancer candidate datopotamab deruxtecan. There’s still hope that this can become a commercial success and Astra’s landed 9 other regulatory approvals since it announced first-quarter results. But with the rating still at a premium, Astra needs to keep scoring goals in the clinic if it’s to hold onto its position as the UK’s most valuable company.”
