EU TRANSPORTATION: Lufthansa; 2Q results
Jul-31 09:36
(LHAGR: Baa3/BBB-/BBB-)
Still has a cost issue - luckily fuel offsetting it this year. Low leverage + guided earnings growth actually has Fitch eyeing rating upside. Note most lines are retail denominated - but non-retail 29s equally uninteresting (flat to IHG).
- 2Q airline performance is still relatively lacklustre: capacity +3.8% but demand not filling it in full: load factor -20bps (at 82%). Yields -1.5% latter two dragging unit revenues -1.8%. Unit costs ex. fuel meanwhile +4.1%. It still has fuel tailwind (-14% in raw terms - more in unit), which net helped EBIT still increase to €690m, +19% y/y on a Q2 EBIT margin of 8.4%.
- Outside airlines, cargo doubled 2Q EBIT contribution to €73m on +8% volume growth and falling costs (ex. fuel) of -8%. Maintenance arm Technik revenue still grew +8% but EBIT moderated to €149m on a 7.6% margin.
- Combined group EBIT rose to €871m (+27%) on a 8.4% margin (+150bps).
- 81% hedged for FY at $816 (spot $738), net levered 1.7x, 88% owned fleet (85% unencumbered)
- Confirms FY25 guidance for "significant increase" in EBIT with no numbers (€1.7b LY, -35% y/y), net capex of €2.7-3.3b (€2.4b LY) and adj. FCF to hold stable y/y (€840m LY) (net of interest was €282m).
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BTP: Basis Trade
Jul-01 09:30
BTP Basis trade, suggest Cash seller:
- IKU5 ~1.67k at 121.51.
FOREX: USD Index Plumbs a New Low as Curve Conspires Against Dollars
Jul-01 09:27
- JPY is comfortably the strongest performer in G10 early Tuesday, with the USD Index extending recent losses to move to new cycle lows. The latest phase of USD sales coincides with an adjustment lower for the US curve, as US 10yr yields slipp to a 2-month low below 4.2% this morning.
- This leaves USD/JPY almost 3.5% off last week's highs, aided by a cleaner positioning profile following last Monday's spike to 148.03. The shooting star candle formation highlights a reversal of the recent recovery and today's weakness in particular has been exacerbated on a break of short-term trendline support, drawn from the May lows.
- For GBP, the latest press lower for the USD has prompted GBP/USD to show to a new cycle high at 1.37893 - this is now the best marked levels since October 2021 and extends the bull cycle in the pair. An uptick in futures volumes on the break to new highs clearly helping here, and shifts focus to 1.38 round number resistance and then the October 20th 2021 high beyond at 1.3835
- The difficulty of passage of today's welfare bill in the House of Commons may not be directly market relevant, but the scale of opposition will serve as a further reminder of the hurdles facing the PM's pro-growth agenda.
- Eurozone CPI estimate came in alongside expectations at 2.0% for June - confirming the ECB's views that inflation should continue to converge with target. ISM Manufacturing data is the scheduled data highlight Tuesday, with markets expecting only a modest improvement in activity for June. Central bank speak is headlined by the ongoing Sintra ECB policy forum, at which central bank heads Lagarde, Powell, Ueda, Bailey and Rhee are all set to make appearances.
EQUITIES: EU Bank outright Put seller
Jul-01 09:20
SX7E (19th Dec) 180p, sold at 5.8 in 4k.
