Early Morning Call: easyJet confident it can beat FY market expectations

Indices overview

The Hang Seng index was the underperformer overnight in the Asia-Pacific region.

China's economy grew at a faster pace than expected in the first quarter (Q1). Gross domestic product (GDP) rose 4.5% compared to the same quarter a year ago, faster than the 2.9% in the previous quarter, and beating economists' forecasts for a 4% increase. But China's rebound has so far remained uneven. Consumption, services and infrastructure spending have showed improvement, but factory output has lagged in the face of weak global growth.

Also released this morning, retail sales growth quickened to 10.6%, beating expectations, while factory output growth also rose by 3.9% year-on-year (YoY) but was just below expectations.

In Australia, the S&P/ASX 200 also ended the session lower as the Reserve Bank of Australia (RBA) minutes revealed that Australian policymakers considered hiking rates for an 11th time in April before deciding to pause. The minutes showed that "members agreed there was a stronger case to pause at this meeting and reassess the need for further tightening at future meetings".

Since the decision last month to keep rates at 3.6%, RBA governor Philip Lowe has been repeating that the pause did not imply that the increases were over. Further tightening could prove to be necessary should inflation and consumer demand stay hot.

Earlier this month, retail sales came softer than expected, but strong full-time employment data emerged last week. Full-time employment surged by 72,200, after a similar increase in February, helping to keep the unemployment rate near 50-year lows. Full-time employment is particularly important as it gives visibility to households and gives them the confidence to increase spending.

Now the market awaits the RBA trimmed mean CPI for the first quarter for a further clue on what it could decide at its next meeting on May 2nd.

UK unemployment rate unexpectedly rose to 3.8% in February, from 3.7% he previous month. Later today, Germany's ZEW economic sentiment is expected to improve to 15.1 in April, after 13 in March.

On the other side of the Atlantic, Canada consumer price index (CPI) growth should continue to decelerate. The market forecast a 4.3% rise in March YoY, down from a 5.2% increase the previous month.

Corporate news

On the corporate front, easyJet expects its 2023 profit to be ahead of market expectations. Strong demand during the Easter weekend despite French strikes and strong bookings for the summer mean the British airline is confident it will beat market expectations for a £260 million profit.

THG posted a full-year (FY) operating loss of £495.6m, and a 2.7% rise in revenue to £2.24 billion. THG's shares rose more than 40% after it said it had received a "highly preliminary" buyout proposal from Apollo Global Management. But if you look at a long-term chart the online retail platform was valued at more than £10 billion in early 2021, but its shares lost more than 90% of their value after it issued a string of profit warnings in the last 12 months.

In the US, investors wait to see if Goldman Sachs and Bank of America earnings will match the ones on Friday, when JPMorgan, Citigroup and Wells Fargo all posted better-than-expected reports.

Goldman Sachs' earnings are forecast at $8.24 per share. Revenue is expected at $12.83bn, a partial recovery after the heavy declines of investment banking and asset and wealth management units.

The Street expects Bank of America to post earnings of 81 cents per share on revenue of $25.25bn.

Outside the banking sector, Johnson & Johnson will report before market. Analysts expect earnings of $2.50 per share and revenue of $23.61bn.

And Netflix is scheduled to post its quarterly earnings tonight after market close. The market expects earnings of $2.86 per share or revenue of $8.17bn.

Revenue has now become really important for investors as Netflix announced last October that, from the first quarter of 2023, it would no longer provide subscriber guidance: "Revenue is our primary top line metric, particularly as we develop additional revenue streams where membership is just one component of our growth".