European markets took in their a lack of a hoped-for signal from the ECB about a quick shot of stimulus to handle Brexit but airline shares hit turbulence yesterday following a bleak outlook from EasyJet.
As expected, the European Central Bank did not announce any new measures at its regular policy meeting yesterday.
However, investors had been looking for ECB chief Mario Draghi to hint strongly at a further loosening in monetary policy in September to deal with any slowdown caused by uncertainty after Britain’s shock vote on June 23 to quit the European Union.
Draghi signalled the “readiness, willingness, ability” of ECB policymakers to use all the central bank’s tools if needed, but also praised the resilience of the markets following the Brexit vote.
Joshua Mahony at financial derivatives trading house IG said the “key takeaway is that Draghi needs more data” before stepping up stimulus.
Expectations of further stimulus have helped European stocks to recover much of their losses following the surprise British vote to leave the EU, but markets took the lack of a clear signal from Draghi in stride.
Frankfurt’s DAX 30 stock index ended the day with a gain of 0.1% at 10,156.21 points while in Paris the CAC 40 edged down 0.08% at 4,376.25 points.
Outside the eurozone, London’s benchmark FTSE 100 stock index slid 0.4% at 6.699.89 points.
Sentiment was hit also by official data showing British retail sales sank in June by the heaviest amount in six months — though on poor weather rather than uncertainty in the run-up to the Brexit vote.
On the corporate front, shares in EasyJet fell 5.3% to 1,067 pence, as the boss of the British no-frills airline warned that carriers are facing one of their most challenging periods “for a long time”, with peak summer bookings hit by terror attacks and Brexit uncertainty.
EasyJet chief executive Carolyn McCall’s comments to reporters came after the airline published a third-quarter trading update that failed to provide a full-year profits forecast.
The airline’s update weighed also on rivals, with shares in British Airways owner IAG shed 3.6% to 405.6 pence and German carrier Lufthansa slumped 6% to €10.44.
The absence of annual profits guidance “is not reassuring and highlights the wide range of potential outcomes, even at this late stage of the year”, said Gerald Khoo, analyst at broker Liberum.
US stocks were broadly flat in late morning trading yesterday following a streak of record-setting sessions, with the the Dow Jones Industrial Average slipping 0.1%.
A tailfin displaying Lufthansa logo is seen at Frankfurt airport. Lufthansa shares slumped 6% to u20ac10.44 yesterday.
