Milder declines for the FTSE and transport operators in the slow lane

“The FTSE 100 saw milder declines on Monday relative to how markets have performed over the past month. A 1.8% dip to 5,415 arguably brought some signs of stability to equities. Futures prices imply the US is set to behave in the same way when its markets open later today,” says Russ Mould, Investment Director at AJ Bell.

“Investors need some sense of calm to help rebuild confidence about putting money, or keeping money, in the markets.

“Australia’s S&P/ASX200 benchmark index jumped 7% after its government announced big stimulus measures including efforts to preserve jobs.

“In the UK, the FTSE was dragged down by oil producers after the Brent crude oil price hit a 17-year low of $23.03 a barrel. The oil market is expected to be in surplus during the second quarter of the year as Saudi Arabia and Russia remain locked in a price war.

“Royal Dutch Shell and BP both fell by approximately 2.5%. Other big losers on the FTSE 100 at the start of the new trading week were Rolls-Royce, Next and Melrose Industries.

“Topping the risers were holiday company TUI, up 5.7%, and chemicals group Johnson Matthey whose update showed some signs of life in China as operations start to ramp back up

Trains, planes and automobiles

“It’s a miserable time to be a transport operator given that lockdown measures deny a large number of individuals from having a ticket to ride. The idea that EasyJet grounds its entire fleet would have seemed unimaginable six months ago, but sadly that is now reality.

“Like many other airlines, EasyJet is trying to get passengers to rebook flights for another time rather than issue refunds so as to avoid having to shell out significant sums of cash. However consumer groups are putting pressure on the sector to give passengers back their cash, so EasyJet’s problems are far from over.

“Grounding its fleet will save it money but at the end of the day the airline would rather be flying people from A to B than sitting idle.

“Other forms of transport are operating on a reduced schedule as there are still people who need to get to work to do essential jobs. It seems unlikely that trains and buses will grind to a halt, although their timetables can be severely cut back.

“Train and bus operator Go-Ahead recently issued a profit warning as travel restrictions took a bite out of earnings, so too did sector peer Stagecoach. It therefore should come as no surprise that ticket seller Trainline would also be hurt, as illustrated by analysts putting through very large downgrades to earnings expectations.

“From a stock market perspective, transport companies have already seen very large share price declines. It would therefore seem natural to suggest that they could be among the first to recover once we get signs that coronavirus is being contained.”

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