Morning Note: Market news and an update from Ryanair Holdings.

Market News

Although US equities paused for breath on Friday – S&P 500 (-0.3%); Nasdaq (-0.5%) – the market still notched its best start to a presidential term since 1985. This was after President Trump talked up policies to boost the economy and lower taxes, while appearing to soften his stance toward tariffs on China — even as he continued to threaten sweeping action. The dollar saw its biggest weekly drop since November 2023, although it has steadied this morning. The 10-year Treasury yield has fallen to 4.56%, while gold slipped to $2,750 an ounce.

The new week has got off to a muted start as Chinese startup DeepSeek raised concerns over US dominance in artificial intelligence and a spat between the US and Colombia reinforced worries about weaponisation of tariffs. The S&P Futures are currently predicting a 1.5% decline at the open this afternoon, with the Nasdaq down 2.7%, driven by concerns over Silicon Valley valuations.

Equity markets in Asia were mixed: Nikkei 225 (-0.9%); Hang Seng (+0.5%); Shanghai Composite (-0.1%). China’s PMI was at 49.1 in January (50.1 forecast), while non-manufacturing PMI was 50.2 (52.2 forecast).

The FTSE 100 is trading 0.5% lower at 8,450. Following recent media speculation around its Guinness brand and stake in Moët Hennessy, Diageo has this morning released a statement confirming it has no intention to sell either. Business activity slumped at British firms and profit warnings have risen, according to two reports that say each trend is the worst it’s been since the pandemic. Gilt yields trade at 4.64%, while Sterling is $1.2430 and €1.1885.

The corporate earnings season gets into full flow this week with updates from LVMH, ASML, Shell, Glencore, Alphabet, Visa, Microsoft, Apple, Meta, Amazon, and Colgate-Palmolive. The Mag 7 are expected to report year on year earnings growth of 21.7% in Q4 vs. 9.7% for remaining 493 companies in the S&P 500.

Source: Bloomberg

Company News

Ryanair Holdings has this morning released results for the three months to 31 December 2024, the third quarter of its March 2025 financial year. The results were well ahead of market expectations, although the company lowered its passenger growth target for a second time in three months as Boeing struggles to deliver aircraft after a strike last year. In response, the share price is 3% higher in early trading.

Ryanair is Europe’s largest airline group, is the parent company of Buzz, Lauda, Malta Air, Ryanair, and Ryanair UK. The company carries around 200m guests p.a. on c.3,600 daily flights from 94 bases. It connects almost 237 airports in 37 countries on a fleet of over 600 aircraft. Events over the last few years highlight that many of the factors driving profitability in the airline industry are outside the group’s control. However, the company believes it is better placed to cope with industry issues – Ryanair has significantly lower costs per passenger than its rivals and this advantage is expected to improve as the group takes delivery of new efficient aircraft. With 340 Boeing 737s on order, the group is aiming to grow passenger traffic to 300m p.a. by 2034.

Many customers are switching to Ryanair for its lower air fares. As a result, the company is capturing record share gains across most markets.

During the latest quarter, passenger numbers grew by 9% to 44.9m, with fares marginally higher. This was despite prolonged Boeing delays and was driven by stronger close-in Christmas/New Year bookings. Total revenue rose by 10% to €2.96bn, made up of a 10% jump in scheduled revenue to €1.92bn and a 10% increase in ancillary revenue to €1.04bn.

The company undertakes fuel hedging to smooth out cost volatility – the group currently has 85% of the current quarter covered at $80/barrel and 75% of FY26 at $77/barrel. Operating costs rose by 8% in the quarter (lagging behind 9% traffic growth) to €2.93bn, as fuel hedge savings offset higher staff and other costs due, in part, to Boeing delivery delays. After tax profit rose from €15m to €149m, well above the market forecast of €60m.

Ryanair has one of the strongest balance sheets in the industry. At 31 December, net cash stood at €75m. In addition, all the group's owned Boeing 737 fleet (582 aircraft) are unencumbered, which significantly widens its cost advantage over competitor airlines, many of whom are exposed long term to expensive finance and lease costs.

The company has a policy to return approximately 25% of prior-year profit after tax by way of ordinary dividends, with surplus cash being returned through special dividends and/or share buybacks. At the half-year stage, the company declared an interim dividend of €0.223, payable in February. Over 50% of the current €800m share buyback programme has been undertaken, with the remainder expected to be completed by mid-2025.

FY25 traffic is expected to reach almost 200m (+9%) guests, subject to no further adverse news on Boeing delivery delays. Unit costs are performing in line with expectations. Given the uncertain external environment, the company is cautiously guiding FY25 After tax profit in a range of €1.55bn to €1.61bn.

While Boeing 737 production is recovering from the strike in late 2024, Ryanair no longer expects Boeing to deliver sufficient aircraft ahead of summer 2025 to facilitate FY26 traffic growth to 210m passengers. As a result, Ryanair has cut its target to 206m (just 3% growth).

Source: Bloomberg