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Andrew Gillham of Team Asset Management offers this week’s market review
A STRONG start to the second-quarter corporate earnings reporting season offset ongoing concerns over tariffs, and US stocks climbed to all-time highs. The blue-chip S&P 500 and technology-focused Nasdaq indices returned 1.6% and 0.6% respectively. Closer to home, the FTSE 100 extended its year-to-date gain to 10% and the index broke above the 9,000 level for first time.
Wall Street’s biggest banks headlined the start of the earnings reporting season and they didn’t disappoint. Goldman Sachs topped forecasts with second-quarter profits jumping 22% from a year earlier to $3.72 billion, driven by busier activity on trading desks as tariffs and geopolitical tensions roiled stock, bond, commodity and currency markets. JPMorgan Chase and Citigroup also beat expectations, and both banks offered an optimistic outlook for the US economy, noting that they were not seeing many signs of weakness in consumer credit.
There were contrasting fortunes for Europe’s largest low-cost airlines. Shares in Ryanair jumped more than 6% on Monday after it revealed that profits had more than doubled to 820 billion euros in the second quarter, boosted by the late timing of Easter and higher ticket prices.
The Irish carrier’s average airfare increased to 50.84 euros, 21% higher than the same period a year earlier, and passenger numbers increased to 57.9 million, putting it on track to reach 206 million for the full year despite the slower-than-expected deliveries of its Boeing 737-Max aircraft.
Shares in rival easyJet, however, tumbled 5% after it warned that industrial action by French air traffic controllers earlier this month would hit its profits by around £15 million. All European airlines were affected by the strike, with 3,000 flights cancelled and more than 7,000 delayed, but easyJet was one of the most impacted as around 75% of its flights serve France or fly over the country on the way to popular destinations in Spain, Italy, Portugal and North Africa.
The airline also said that higher fuel costs following the 12-day Israel-Iran war would increase its costs by £10 million. Looking forward, it provided a more upbeat tone, revealing that 67% of seats for July to September had been sold.
Netflix was another company to suffer last week, as its shares fell more than 5% despite announcing some impressive quarterly results. The video streaming giant’s net income rose 45% to $3.1 billion, boosted by some blockbuster hits, including the third season of Squid Game, which attracted 122 million views. It also expanded its live content, headlined by weekly episodes of WWE Raw, and raised its revenue forecast for the rest of the year to reflect the benefits of a weaker US dollar and growth in advertising sales.
However, Netflix warned that “operating margin in the second half of 2025 will be lower” owing to content amortisation, which prompted some profit taking. Its slate for the rest of the year includes the finale of Stranger Things, Happy Gilmore 2 and Frankenstein, Guillermo del Toro’s adaptation of Mary Shelly’s classic novel from 1818.
In economic news, two reports highlighted the challenges faced by members of the Bank of England’s Monetary Policy Committee when deciding whether to cut interest rates next month. On Wednesday it was reported that annual UK consumer price inflation had unexpectedly accelerated to 3.6% in June, its highest level in 18 months, driven by increases in petrol prices, airfares and rail tickets. A day later, it was revealed that the unemployment rate had increased to a four-year high of 4.7% and employees on payrolls fell by more than 41,000 in June, a fifth consecutive month of declines. The figures reflect the continued fallout from the increased minimum wage and the £25 billion hike in national insurance contributions announced in last October’s budget.
In commodities markets, Brent crude held steady at $69 a barrel as markets weighed the threat of US sanctions on buyers of Russian oil against the increased production from Saudi Arabia, the world’s biggest exporter of oil. Gold and silver continued to shine, attracting demand from investors seeking to diversify their safe-haven assets.
The focus this week will remain on corporate earnings, including reports from Google’s parent Alphabet, Tesla and Lloyds Banking Group.
The economic calendar is headlined by the European Central Bank’s interest rate decision tomorrow.
