Markets await US policy hints and two ways of looking at Peloton’s price cut

“The FTSE 100 was marking time early on with US Federal Reserve chair Jerome Powell set to address the Jackson Hole summit of economic policymakers later,” says AJ Bell financial analyst Danni Hewson.

“Whether Powell will say anything of substance remains to be seen, although the slightest hint in the direction of tapering could prompt an outsized market response.

“The resources sector provided some support to the UK’s flagship index as mining stocks followed commodity prices higher on a quiet day for corporate news ahead of the August Bank Holiday.

“News from aircraft charter services group Air Partner and reports on British Airways owner International Consolidated Airlines hinted at the kind of reinvention the aviation sector might have to resort to in a post-pandemic world.

“Air Partner is seeing demand from high-net worth individuals looking to jet off on holiday make up for a loss of corporate custom.

“Separately British Airways is reported to be planning the launch of a budget airline to take on EasyJet and Ryanair after the collapse in business travel hit its flagship routes – particularly flights from London to New York.

“Elsewhere guarantor loans firm Amigo’s days may be numbered as it faces a tsunami of compensation claims amid a much tougher regulatory backdrop for subprime lenders.”

Peloton

“During lockdown, people were so frustrated at being stuck at home that many individuals had no problems paying a premium to own a Peloton bike if it meant they could bring much-loved leisure activities into their living room. Peloton sales went through the roof and there was a big waiting list to get hold of equipment.

“Reality is now creating a conundrum for the company as we have the freedom to go outside and either return to the gym or get on the type of two wheels that actually propel you forward.

“So where does that leave Peloton? A lot of people will have become accustomed to using its services during lockdown and may stay loyal as there is a convenience factor of being able to work out at home rather than go to a sweaty gym.

“But picking up new customers will be a bit harder. Once it has lured people in, the goal is to sit back and enjoy recurring revenue from subscription income.

“Taking drastic action to get more people onto its books might therefore explain why it has slashed prices by quite some margin.

“There are two ways of looking at the situation. On one hand, cutting prices could be viewed as a business panicking. On the other hand, Peloton could find that making its products more affordable gives it an edge over the competition.

“Cheaper rivals will now have less of a price differential and they will either need to come up with a service that makes them stand out from the crowd or cut their own prices which puts pressure on their profit margins.

“While price cutting may not be as daft as you might think, there is still the question of whether lower prices might damage the halo effect around what has been positioned as a premium brand.”

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