LONDON MARKET PRE-OPEN: Ryanair Cuts Capacity; VAT Chop Helps Domino's

(Alliance News) - Stock prices in London are seen opening lower on Thursday amid concerns about the reimposition of coronavirus lockdowns and fading hopes of agreement on a new US stimulus package.

In early company news, Irish budget carrier Ryanair Holdings reduced its winter capacity as coronavirus restrictions plague the travel industry. Delivery chain Domino's Pizza said it was given a third-quarter boost from the UK government's value added tax cut and as more customers stayed home. Rothmans and Dunhill cigarette maker British American Tobacco named a new chair.

IG futures indicate the FTSE 100 index is to open 29.06 points lower at 5,906.00. The blue-chip index closed down 34.65 points, or 0.6%, at 5,935.06 on Wednesday.

Domino's Pizza said it saw a strong performance in the third quarter and expressed confidence in its full year outlook.

For the 13 weeks to September 27, UK & Republic of Ireland system sales were up 19% to GBP342.1 million from GBP288.2 million at the same time last year.

Domino's highlighted that the UK value added tax rate was slashed to 5% from 20% in July, and this helped franchisees mitigate costs and enabled savings to be passed onto customers. Since the rate change, VAT has boosted reported UK system sales and like-for-like growth, it said.

The pizza chain reported an encouraging UK & ROI delivery performance, with order numbers up 12% and items per order and product mix both "encouraging".

Looking ahead, Domino's expects to report full year underlying pretax profit in the range of GBP93 million to GBP98 million, in line with market consensus. The company reported an underlying pretax profit of GBP98.8 million for financial 2019.

"We saw a benefit from staycations and the return of live sport on television during the period, although we also saw a headwind as competitors reopened following the national lockdown and, in September, we saw weaker demand in university areas. We were pleased to reopen our collection business, and collection orders were around 60% of the prior year level. We do not expect our collection business to fully recover to prior levels until normal consumer behaviour returns," Domino's added.

Ryanair Holdings said forward bookings have "materially" weakened in November and December due to increased flight restrictions imposed by EU governments. It will close its bases in Cork and Shannon in Ireland and in Toulouse in France this winter as Covid-19 continues to hurt the travel sector.

In light of the weaker bookings, the Irish carrier further reduced its winter schedule, from November to March - taking capacity down to 40% from 60% of prior year.

Ryanair said with the greatly reduced winter capacity and load factors of around 70%, it now expects full year traffic to fall to 38 million passengers. The airline said this guidance could be further revised downwards if EU government continue to "mismanage air travel and impose more lockdowns this winter".

"It is inevitable, given the scale of these cutbacks, that we will be implementing more unpaid leave, and job sharing this winter in those bases where we have agreed reduced working time and pay, but this is a better short-term outcome than mass job losses. There will regrettably be more redundancies at those small number of cabin crew bases where we have still not secured agreement on working time and pay cuts, which is the only alternative," said Chief Executive Michael O'Leary.

British American Tobacco said Non-Executive Director Luc Jobin will succeed Richard Burrows as chair at the conclusion of the company's annual general meeting in April. Jobin will be appointed as chair-designate in March. Jobin served as CEO of Canadian National Railway Co and of Imperial Tobacco Canada.

Schroders said assets under management as at September 30 was GBP536.3 billion, up 2.0% from GBP525.8 billion on July 1.

US Treasury Secretary Steven Mnuchin on Wednesday said that, despite some progress, he still has not reached an agreement with Democratic lawmakers on a new stimulus package for the US economy.

"We continue to make progress on certain issues, on certain issues we continue to be far apart," Mnuchin said during a virtual appearance at an economics conference.

The two sides are unable to agree on how much to spend, or what form to spend it in, with Democrats demanding aid for struggling state and local governments that are at the front line of delivering aid.

Elsewhere, France on Wednesday became the latest European country to toughen anti-coronavirus measures, imposing a curfew in Paris and eight other cities from Saturday, while Germany and Ireland also ramped up restrictions.

UK Prime Minister Boris Johnson is also under increasing pressure to impose more stringent measures to cut spiralling infection rates in England, including a two-week "circuit-breaker" lockdown.

"With the prospect of an imminent US stimulus plan diminishing by the day, rising infection rates prompting tighter restrictions across Europe, and little prospect of a vaccine before the middle of next year, is it any wonder that investors are starting to get a little twitchy, with European markets set to open lower this morning," said CMC Markets analyst Michael Hewson.

The pound was quoted at USD1.3021 early Thursday, flat from USD1.3029 at the London equities close on Wednesday.

Meanwhile, EU leaders are to take stock of the talks with the UK on a post-Brexit trade deal amid "frustration" in London at the slow progress.

Ahead of the latest EU summit in Brussels, Johnson voiced his "disappointment" that they had not been able to move forward more quickly on negotations.

The UK PM had previously said that he would walk away from the negotiations unless there was agreement by the time of the two-day gathering in the Belgian capital, starting Thursday.

However, in a call with European Commission President Ursula von der Leyen and European Council President Charles Michel on Wednesday evening, Johnson said he would "reflect" on the outcome of the summit before making a decision.

Meanwhile, von der Leyen and Michel again reiterated that while the EU still wanted a deal, it could not be at "any price".

The euro was priced at USD1.1755, flat from USD1.1760. Against the yen, the dollar was quoted at JPY105.25, up from JPY105.07.

The Japanese Nikkei 225 index ended down 0.5%. In China, the Shanghai Composite is flat, while the Hang Seng index in Hong Kong is down 1.2%.

The rise in Chinese consumer prices slowed for a second successive month in September, official data showed as pork supplies bounce back from the devastating African swine fever while farms recovered from flooding.

The consumer price index - a key gauge of retail inflation - rose 1.7% last month from a year ago, compared with a 2.4% reading in August, according to the National Bureau of Statistics.

In commodities, Brent oil was trading at USD43.33 Thursday morning, up from USD43.18 at the close Wednesday. Gold changed hands at USD1,898.73 an ounce, down from USD1,909.80.

The economic events calendar on Thursday has US unemployment insurance weekly claims report and import & export price indexes are due at 1330 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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