Morning Note: Market news and updates from Delta Air Lines and Spirax Group.

Market News

US equities fell heavily last night – S&P 500 (-2.7%); Nasdaq (-4.0%) – amid concerns that tariffs and government spending cuts will torpedo growth in the world’s largest economy. The Mag-7 fell by 5.4% and is now 20% off its peak. Tesla is down 45% so far this year.

In Asia this morning, the sell-off in stocks eased, with local markets recovering most of their early losses: Nikkei 225 (-0.6%); Hang Seng (flat); Shanghai Composite (+0.4%). Citi downgraded US stocks and upgraded China, citing a pause in American exceptionalism.

US-China trade talks have stalled at lower levels, people familiar said, with both sides failing to agree on how to proceed. There’s no planning for an in-person meeting between Trump and Xi Jinping. Meanwhile, the Marco Rubio downplayed the possibility of a breakthrough in today’s meeting in Saudi Arabia between US and Ukrainian officials, saying talks will focus on potential concessions.

The FTSE 100 is currently little changed at 8,594. UK shoppers cut back spending in a warning sign for Chancellor Reeves. Retail sales only rose by 1.1% in February compared to last year, down from the previous month’s 2.5% and lower than inflation. Sterling trades at $1.2920 and €1.1854.

The euro climbed after the co-leader of Germany’s Greens said the party is ready to negotiate and sees the chance of a defence spending deal this week. Gold edged up to $2,910 an ounce, while Brent Crude is $69.35 a barrel.

Source: Bloomberg

Company News

Last night Delta Air Lines cut its guidance for the first quarter, highlighting that the environment had weakened due to US economic uncertainty. In response, the shares were marked down by 11% after hours, with a similar impact seen throughout the sector.

Delta is one of the world’s largest global carriers with a fleet of around 1,300 aircraft that are varied in size and capabilities, providing flexibility to adjust aircraft to the network. The group has acquired new and more fuel-efficient aircraft with increased premium seating to replace older aircraft and has reduced fleet complexity with fewer fleet types. In the latest quarter, the group took delivery of nine aircraft. With an industry-leading global network, Delta and the Delta Connection carriers offer service to more than 290 destinations on six continents.

In yesterday’s unscheduled update, the company slashed its guidance for the first quarter, saying worries over the US economic outlook are hitting demand for travel amid concern over a global trade war, mounting inflation pressures, and signs pointing to a possible recession.

Delta now expects Q1 revenue to grow by only 3%-4%, down from previous guidance of 7%-9%. The forecast for earnings in the quarter has been drastically cut to be between 30c and 50c a share, well below the market estimates of 86c and the company guidance of 70c-100c.

This marks the first time a major airline has said that recent economic woes are hitting sales as corporate spending on travel has started to stall. Domestic demand has also been impacted by the drop-off in consumer confidence.

The size of the reduction came as a surprise – the hope was that Delta would be better protected than rivals, with its customer base seen to be more affluent than average.

Source: Bloomberg

Spirax Group has this morning released its 2024 results and provided guidance for 2025. In response, the shares are down 2% in early trading.

Spirax (formerly Spirax-Sarco Engineering) is a UK-listed industrial company, with annual sales of £1.7bn. The group is a world leader in each of its three businesses. In Steam Thermal Solutions (52% of revenue), Spirax Sarco and Gestra are leaders in the control and management of steam. In Electric Thermal Solutions (ETS, 24%), Chromalox and Thermocoax provide electrical process heating and temperature management solutions. Finally, Watson-Marlow Fluid Technology (24%) provides niche peristaltic pumps and associated fluid path technologies.

The group’s products are used in almost every industry worldwide: from the food sector where steam products are used in blanching, baking, packaging, and cleaning; to the pharmaceutical industry where pumps and associated fluid path equipment are critical to the production of life-saving medicines; through to the aviation industry where electrical heating elements are used in the de-icing of aeroplanes.

85% of revenue is generated from maintenance and operational (opex) budgets rather than capital (capex) budgets. Of that 85%, 50% comes from essential repair and maintenance activities, while 35% comes from small projects that improve existing systems. As a result, the group has a long history of stable, sustainable growth and strong profitability.

However, in 2023 and 2024 the group experienced a weaker macroeconomic environment – last year global industrial production (IP) fell by 1.7%. In response, the group took early action across all three businesses to appropriately right-size capacity and overhead support costs as well as implementing temporary cost containment actions and reducing variable compensation. In January 2025, the company began the implementation of a restructuring programme that is expected to realise annualised savings of approximately £35m, with 40% achieved in 2025.

Despite the soft backdrop, in 2024 the group generated revenue of £1,665m, up 4% in organic terms.

Within the Steam Thermal Solutions (STS) business, sales rose by 1% organically, with higher growth in the second half. Sales in the Electric Thermal Solutions (ETS) business were up 10% organically, supported by operational improvements. Watson-Marlow organic sales grew by 3%, driven by Process Industries and early signs of a recovery in Biopharm.

The group’s adjusted operating profit margin rose by 10 basis points in organic terms to 20.1% and, as a result, adjusted operating profit grew by 4% in organic terms to £334m.

The group is financially robust, with adjusted cash conversion was 87%, supported by working capital management. Net debt fell by 11% to £596m, with gearing of 1.6x net debt to EBITDA. The group has a strong track record of dividend growth, with 56 years of progress. The 2024 payout has been increased by 3% to 165p to generate a yield of 2.4%.

Looking to 2025, organic growth is expected to be consistent with 2024, well ahead of IP, with margin progress and mid-single digit organic profit growth. Over the medium term, the aim is to grow ahead of underlying markets, with high-single digit profit growth delivered through mid-single digit organic sales growth and an improving margin reaching between 22% and 23%. This will drive cash conversion of over 80% and an improving return on capital.

Source: Bloomberg