Must read: FTSE 100, UK house prices, Flutter, Apple

With plenty for investors to digest Monday morning, our head of investment analyses the news moving markets right now. 

GLOBAL MARKETS 

Coming off the back of the best week in almost two years, the FTSE 100 is trading lower this morning after hopes were dashed that China could be set to ease its strict zero-tolerance to Covid approach, pushing the miners into the red. Oil is also under pressure while gold has fallen from a three-week high.

The travel and leisure sector is outperforming thanks to strong results from Ryanair, while Flutter Entertainment (LSE:FLTR) is trading at the top of the UK index after Fox ended its legal battle with the gambling company over FanDuel’s price.

Despite disappointing trade data from China, with annual exports declining for the first time since May 2020, the Hang Seng continues its ascent from Friday, rallying another almost 3%. 

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Focus stateside is on Tuesday’s midterm elections, with Republicans expected to regain control of the House of Representatives. China and US inflation figures also take centre stage which are released on Wednesday and Thursday respectively. Plus, world leaders gather in Egypt this week for the COP27 UN climate change summit amid concerns that progress since last year’s meeting has been ‘woefully inadequate.’

UK HALIFAX HOUSE PRICE INDEX 

UK house prices fell by 0.4% month-on-month in October versus a 0.1% drop in the previous month. Annual house price growth came in at 8.3%, slowing from 9.8% in September. 

There was a notable slowdown in October’s annual house price growth, while the monthly rate posted the steepest drop since February 2021, confirming other recent indicators that the UK housing market is starting to cool.

The cost-of-living crisis, an imminent recession and rising mortgage rates are weighing on demand, while a chronic shortage of supply continues to stem an even steeper decline. First-time buyers are struggling to get onto the housing ladder, pushing up prices in the rental market as rising interest rates from the Bank of England make houses and flats less affordable. There is a growing expectation that house prices will continue to sink into next year with demand in greater London getting hit hardest.

Estate agent activity has fallen off a cliff since the mini-budget, with many potential buyers in wait-and-see mode until lending markets settle down again. On top of that, with a growing expectation that house prices will decline into next year, many potential buyers are holding off and waiting until 2023 when property is likely to be on sale, exacerbating the present downward pressures on demand.

RYANAIR 

Ryanair reported its largest ever first half profit of 1.371 billion euros, below expectations but ahead of its previous first-half record in 2017 of 1.29 billion euros. It flew a record 96 million passengers during the six months and hopes this will rise to 185 million next year. Also ahead, the low-cost carrier expects to make an annual profit of between 1 billion and 1.2 billion euros in the year to March 31st. 

Although the winter will be challenging for Ryanair, it enjoyed an impressive summer performance thanks to the release of pent-up demand for international travel post pandemic. Despite pressures from cabin crew strikes and wider airport chaos, it managed to log an impressive record first half performance. With a recession on the horizon, the ongoing reduction in business travel and the seasonally slower months ahead, winter will be a struggle, but Ryanair remains optimistic about next year both in terms of profitability and passenger numbers. 

APPLE 

Over the weekend Apple Inc (NASDAQ:AAPL) said it expects lower iPhone 14 Pro and iPhone Pro Max shipments because of Covid-19 restrictions in China, which have disrupted production in its critical Zhenghzhou factory. Meanwhile, according to a report from Bloomberg, Apple has trimmed its new iPhone output by 3 million units on the back of cooling demand. 

As we head towards the critical festive period, Apple is facing ongoing headwinds from the global supply chain as China’s draconian efforts to pursue its zero-Covid policy weighs on the output of its suite of products. This is leading to longer wait times for customers as well as lower shipments.

At the same time, rising inflation and the threat of recession in its key markets are dampening demand for the iPhone, its most important product as we head towards Christmas. Plus, Apple is also grappling with a negative translation effect from the greenback’s strength which is reducing the dollar value of its international sales. Despite this, Apple still managed to beat expectations on the top and bottom line in its quarterly results ten days ago. 

Shares suffered their worst weekly drop in over two years last week since the start of the pandemic, as rising interest rates continue to steer investors away from Big Tech. Apple is trading lower in Frankfurt this morning ahead of the US open and the stock is down over 20% year-to-date, outperforming the wider US tech sector.