Market movers: FTSE 100 in the red, British Airways, sterling, Gatwick, Zoom

Victoria Scholar, interactive investor's head of investment, runs through today's big stories and how financial markets are reacting. 

European markets have opened on a weaker note with autos and technology underperforming, while oil and gas and basic resources are the only sectors in the green.

Overnight, Japan’s August flash PMI saw factory activity grow at the slowest pace in 19 months. France’s manufacturing PMI fell to a 27-month low of 49 in August, below the key 50 boom-bust divide.

Sterling has touched a fresh two and a half year low against the greenback, while the euro has weakened to a fresh two-decade trough trading below parity, as king dollar continues its reign.

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BRITISH AIRWAYS

British Airways said it will make fresh cancellations potentially until the end of October in the wake of Heathrow’s decision to reduce the daily cap of passengers allowed to travel through its airport in an attempt to offset some of the recent travel disruption. Sky News reported that BA would cut its winter capacity until the end of March by 8%, affecting around 10,000 flights. The airline said it will offer customers another flight or a refund if they are faced with cancellations.

Shares in International Consolidated Airlines Group (LSE:IAG) are trading modestly higher this morning, largely unaffected by the update. For passengers, it looks like the chaos is here to stay with further cancellations extending into the second half of 2022 and probably into 2023 as well. Whether the cap on travellers will alleviate the airport’s strain on staff, baggage delays and lengthy queues is yet to be seen.

GATWICK

Gatwick raised its traffic forecasts for 2022 to 32.8 million passengers, thanks to increased demand in the first half. Demand hit 74.3% of pre-pandemic levels in the second quarter, while the company managed to achieve first half EBITDA of £148.3 million.

Despite this summer’s travel chaos with strikes, cancellations and delays, supercharged post-Covid demand for summer holidays is providing a tailwind for Gatwick Airport. Passengers are still desperate to get away possibly for the first time since the pandemic, far from deterred by the potential for stressful journeys there and back. The airport achieved a notable profit and the trajectory for passenger traffic is encouraging.

ZOOM

Zoom Video Communications (NASDAQ:ZM) downgraded its annual profit and revenue guidance, sending shares lower by 8.3% after-hours. Operating expenses grew by 51% in the three months to July to $704 million and it reported its slowest quarterly revenue growth on record of 8%.

Zoom was the poster child stay-at-home stock during the pandemic with a surge in business calls taking place on the video communications platform when we were in lockdowns. However, since economies around the world reopened, Covid restrictions eased, working from home declined and face-to-face meetings recommenced, Zoom has struggled to uphold its 2020 momentum. Plus it is facing higher costs from inflation and marketing spending required to attract new customers. This has resulted in higher operating expenses and has put pressure on margins. There has been a notable sustained business shift towards working from home and remote meetings, so Zoom still has an important place in a post-pandemic world, but repeating the sky-high demand from the height of 2020 feels unlikely at this stage.