What to Watch: EasyJet revenue boost, Hong Kong withdraws bid, US–Japan deal

Edmund Heaphy
Finance and news reporter
Ryanair and Easy Jet planes in Berlin. Photo: Jakub Porzycki/NurPhoto via Getty Images

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Plane strikes at rivals boost demand at EasyJet

EasyJet (EZJ.L) said on Tuesday that strikes at rivals British Airways and Ryanair boosted its revenue in the second half of its financial year.

The low-cost airline had previously warned that revenue per seat would be “slightly down” compared with the same period in 2018.

EasyJet said that before-tax profits for the 12 months to the end of September would likely come in between £420m and £430m, in the upper range of its previous forecast.

The airline expects passenger numbers in the year to climb by 8.6% to 96 million, largely due to a 10% increase in capacity. Load factors — a key metric in the airline industry that measures how many seats are filled — will increase by 1.4 percentage points, to 91.5%.

Ryanair (RYA.L) was hit with a series of strike-related issues in September. While British pilots called off the majority of planned strikes, the airline was forced to cancel several flights in Spain after cabin crew in the country announced a 10-day walkout.

British Airways was hit more severely: more than 2,000 flights were cancelled as part of a two-day pilot strike. British Airways parent IAG (IAG.L) said the strikes cost it more than £120m, and that full-year profits will be dented as a result.

"EasyJet has continued to perform in line with expectations, despite challenging market conditions,” said CEO Johan Lundgren.

Hong Kong Stock Exchange drops £32bn bid for London Stock Exchange

The Hong Kong stock exchange on Tuesday pulled its takeover bid for the London Stock Exchange Group (LSE.L), a month after proposing to merge the two companies in a £32bn ($39.1bn) deal.

The LSE rejected the offer the day after the proposal, saying that there were “fundamental” flaws and concerns over the proposal.

Hong Kong Exchanges and Clearing said in a statement on Tuesday that, while it believed the combination would be “strategically compelling”, it no longer intended to make an offer for the London Stock Exchange.

“Despite engagement with a broad set of regulators and extensive shareholder engagement, the Board of HKEX is disappointed that it has been unable to engage with the management of LSEG in realising this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal,” it said.

Shares in the LSE plunged by over 6% in early trading after the bid withdrawal.

US and Japan sign limited trade deal

The US and Japan on Monday signed a trade agreement that will see the Asian country open its markets to $7bn (£5.7bn) of American agricultural goods.

Though the pact also includes $40bn worth of digital trade commitments, it falls short of the Trans-Pacific Partnership that the Trump administration withdrew from in early 2017.

The deal, which was agreed in September by US president Donald Trump and his Japanese counterpart Shinzo Abe, also does not address the thorny issue of auto tariffs.

Automakers in Japan had hoped that 2.5% tariffs on Japanese cars would be eliminated as part of the agreement. Though Japan secured a commitment that they would not increase further, the text of the agreement contains no explicit assurances.

Following the announcement of the deal in September, Trump trade adviser Robert Lighthizer said that new tariffs on Japanese cars were unlikely.

The deal cuts Japanese trade barriers to American beef, pork, wheat, cheese, wine, and almonds, among other goods. It also reduces US tariffs on Japanese turbines, machine tools, bicycles, green tea, and flowers, among others products.

No tariffs for 88% of UK imports in event of no-deal Brexit

Under a revised the tariff regime, the UK said on Tuesday that 88% of total imports to the country by value would be eligible for levy-free access.

The UK government said that it could make changes to the new regime under a no-deal Brexit on day one if necessary, under an “exceptional review process.” The plan is a revision to the one it published ahead of the original Brexit deadline in March this year.

UK prime minister Boris Johnson has until 31 October to seal a deal with the EU over Brexit.

However, the European Union will decide this week whether a Brexit deal is possible, which will fundamentally alter the decision course of parliament before the Brexit deadline.

European stocks mixed

European stocks were mixed on Tuesday, with the FTSE 100 (^FTSE) on the level. Germany’s DAX (^GDAXI) was down 0.35%, while France’s CAC 40 (^FCHI) was down by 0.36%.

The pound fell 0.4% against the dollar (GBPUSD=X) on Tuesday, pushing it to around $1.224. The pound was down 0.56% against the euro (GBPEUR=X), to around €1.114.

What to expect in the US

Futures are pointing to lower open for US stocks.

S&P 500 futures (ES=F) are down 0.12% and Dow Jones Industrial Average futures (YM=F) are down by 0.11%. Nasdaq futures (NQ=F) are down marginally, by 0.06%.

Companies reporting later on Tuesday in the US include:

  • Domino’s Pizza (DPZ)

  • Levi Strauss (LEVI)