Financial market research and analysis

Airline companies are feeling the pinch as frequent terrorist attacks, combined with the UK’s decision to exit the European Union, are increasingly weighing on business. Following weak results from easyJet and Lufthansa last week, Ryanair (+6.06%) posted a 4.5% rise in its first quarter profits although fares fell by 10%. The company warned of ‘significant risks to the downside’ due to the Brexit and mounting terrorism in Europe yet did not give a profit warning just yet. Nevertheless, Ryanair expects Q2 fares to be at least 6% lower; this would result in a significant 8% decline in tariffs through the first half of this year. The second half doesn’t look brilliant either, with an estimation of 10% to 12% fall in ticket prices. Fortunately, soft oil prices help partially squeezing the operating costs, hence largely contribute in smoothening results in a slower business environment. Ryanair considers ‘pivoting growth away from the UK’, though. Despite decent sector volatility, 80% of analysts covering the stock remain buyers with a 12-month target price at 14.66p.


G20 said ‘expansion not austerity’

‘Expansion not austerity’ summarized the G20 meeting over the weekend. G20 nations pledged to use ‘all policy tools’ to support growth, hinting at further fiscal and monetary stimulus across the globe. Leaders also voiced their concern regarding Britain’s decision to leave the European Union, mounting terrorism and the Trump-threat in the run up to the US presidential election.

The Federal Reserve (Fed) and the Bank of Japan (BoJ) will give their policy verdicts this week.

The Fed is expected to remain on hold and to deliver a cautious accompanying statement given the rising political and economic risks following the Brexit vote. The expectations of a Fed rate hike by the end of the year have faded to zero. In contrary, the market is pricing in more than a 50% chance for an interest rate cut in the US by March 2017.

The Bank of Japan (BoJ) is also under close watch this week. Global slowdown, risk-off inflows into the yen following the Brexit vote and cheaper oil imports with a stronger currency continue weighing on inflation and inflation expectations in Japan. Many expect a dovish BoJ statement this Thursday. The USDJPY consolidates above the 106 mark on expectations for additional monetary stimulus.