Must read: US debt ceiling, easyJet, BT, Aston Martin

Our head of investment rounds up the morning's big news.

GLOBAL MARKETS 

European markets have opened higher, with the FTSE 100 in the green, reversing some of this week’s declines. Positive sentiment on Wall Street has permeated across global markets amid growing hopes of a US debt ceiling deal.

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EASYJET

easyJet (LSE:EZJ) reported a six-month pre-tax loss of £415 million, broadly in line with expectations, rising 25% versus the same period last year. Its load factor increased to 87.5% versus 77.3% year-on-year, with a jump in revenue per seat up 40% to £66.46. easyJet’s relatively new holidays division continues to enjoy rapid growth with customers up 200%. However, its fuel expense per seat jumped 71%, worsening the group’s overall costs by 52% to £3.1 billion.  

The low-cost carrier is anticipating strong bookings over the all-important summer season as many individuals and households continue to plan holidays despite the cost-of-living crisis. While prices have been going up for customers, easyJet airfares remain a value proposition, appealing to the growing number of increasingly budget conscious travellers amid the squeeze on real incomes.  

After the pain of the pandemic, the airline industry has been grappling with inflationary headwinds, a weakening consumer, strikes, cancellations and staff shortages. Despite this, investors have been piling back into the sector amid hopes that inflation clouds will finally start to part, improving consumers’ prospects and diminishing cost pressures. 

Shares in easyJet opened lower but have since turned higher. The airline has enjoyed an extremely strong performance so far in 2023, rallying by nearly 60%, recovering off the nadir last October following the mini-budget market meltdown. 

BT GROUP 

BT Group (LSE:BT.A) is planning to cut 55,000 jobs by 2030 as it looks to slim down its operations and reduce its cost base. ‘A big chunk of job cuts will be in the UK’, said BT’s CEO Philip Jansen. It is targeting £3 billion in cost savings by 2025. Full-year core earnings rose by 5% to £7.9 billion, in line with analysts’ expectations, but BT reported disappointing free cashflow down 5% to £1.3 billion and pre-tax profits slumped 12% to £1.7 billion. 

Telecoms appears to be awash with job cuts, with Vodafone Group (LSE:VOD) and BT reducing the size of their workforces. Both have been struggling with the pressures of inflation, most notably from energy. BT is focusing on digitisation and integrating AI, a shift which is likely to require fewer workers. Last year the telecoms operator was caught up in a bitter dispute with workers over wages amid the cost-of-living crisis, resulting in BT’s first national strike for 35 years. 

Shares in BT have fallen sharply today by nearly 9% and are languishing at the bottom of the FTSE 100, but the stock remains higher by around 17% year-to-date.

ASTON MARTIN 

China’s Geely has announced plans to invest approximately £234 million in Aston Martin Lagonda Global Holdings Ordinary Shares (LSE:AML), sending shares in the luxury automaker soaring over 10%. It is acquiring around 42 million existing ordinary shares from Yew Tree at 335p per share, a significant premium to its current share price. Geely’s Chairman Eric Li said this ‘reflects our confidence in the company’s growth prospects.’ The Chinese auto manufacturer has now become Aston Martin’s third largest shareholder.

Today’s announcement has provided a major tailwind to shares in Aston Martin which are now up over 60% in 2023, making it the best performing stock on the FTSE 250 in the past six months. 

Aston Martin is a glamorous automaker with a chequered past having survived several bankruptcies. But James Bond’s favourite carmaker has revved back into the fast lane with a pick-up in sentiment spearheading investor returns on the stock. 

Demand for luxury goods including cars has proven to be extremely resilient amid the cost-of-living crisis and a growing tranche of ultra-high net worth consumers. Earlier this month Aston reported a narrower pre-tax loss in the first quarter of £74 million versus £112 million year-on-year. 

This investment is a welcome developed at a time when there are growing concerns about the Brexit trade deal for UK auto manufacturing. Stellantis this week sounded the alarm over potential tariffs on exports to the EU. UK auto manufacturing has come under significant pressure since the referendum with annual car manufacturing more than halving between 2016 and 2022.