Oil prices lift FTSE and Ryanair is in a tailspin
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“Oil prices are rallying once again and are taking commodity producers along for the ride," says Russ Mould, Investment Director at AJ Bell.

“A 1.3% rise in Brent Crude to $73.18 is positive for two London-listed stocks which sit among the largest constituents of the FTSE 100, helping to explain why the blue chip index nudged ahead on Monday.

“Royal Dutch Shell rose 0.7% to £25.53 and BP advanced 0.6% to 559.49p. The FTSE 100 added three points, or 0.1%, to 7,352.

“Oil prices surged last week on renewed supply concerns amid tension in the Middle East. Oil producers’ cartel OPEC has now indicated it may sustain previous production cuts which would in theory help to support oil prices.”

Ryanair

“With full year profit at the lower end of reduced guidance from January and a gloomy outlook it is little wonder budget airline Ryanair is in a tailspin.

“Times are tough for the travel industry. Brexit is affecting consumer sentiment, appetite for travel and the operating environment for the airlines themselves. If that weren’t enough, oil prices are on the rise and excess capacity is adding to the pressure on profitability.

“Ryanair can offer little reassurance to its shareholders that the current turbulence will subside as there is no visibility on fares. Or in other words, the good news for passengers is that they are likely to continue to pay less to fly.

“And while the business is doing its best to keep them under control, costs are steadily increasing, even if you take fuel out of the equation. This is notable given the company built its success on very tight control of the purse strings.

“The silver lining to this thick cloud is that its peer group are facing exactly the same pressures and many operators have far less secure balance sheets than Ryanair.

“Over time this could help relieve some of the competitive pressure and may even present opportunities for acquisitions.”

These articles are for information purposes only and are not a personal recommendation or advice.

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The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.