• FTSE 100 down 22 points
  • Oil continues to gain
  • Pound slumps further

12.45pm: British Airways owner, easyJet PLC remain under pressure

British Airways owner IAG and easyJet PLC remained under pressure on Monday in response to growing oil prices.

Though airlines buy some fuel in advance to hedge against potential increases, oil’s latest rise comes after a new wave of US sanctions against Russian oil last week which have threatened to wipe off the impact of an expected supply surplus this year.

easyJet reported in November that it was 80% hedged on fuel for the first half of 2025, with this set to fall to 24% come early 2026.

IAG highlighted a similar strategy to hedge “a proportion” of its fuel consumption for up to two years.

According to the airline, the fair value of such contracts was €121 million (£102 million) over the first half of the year as buying in advance paid off.

IAG shares fell by 3.5% to 304.9p, while easyJet dipped by 2.7% to 494.2p on the back of the climb.

Come Monday afternoon, Brent was up 1.7% and 5.6% for the day and week respectively at US$81.13 and trading at its highest level since August.

12.01pm: Bond yields ‘far from’ peaking – Deutsche

Bond yields have further to go before peaking despite a surge in recent days, Deutsche Bank analysts have said.

According to the bank, traders had been speculating that yields would look attractive once the Federal Reserve cut interest rates further.

However, expectations for any such cuts in 2025 have effectively been wiped after strong US jobs data last week.

This has left rates with further to climb to match historic risk premiums against cash yields, Deutsche said in a note, adding “the great yield adjustment is still underway”.

US 10 and 30-year Treasury yields have jumped by 38 and 35 basis points over the past month respectively, fueled most recently by Friday’s non-farm payrolls report.

“Very low recession odds [and] a Fed unlikely to hike implies the next move higher in yields should still be led by steeper Treasury curves,” analysts noted.

Yields on 10 and 30-year US bonds could be up to 60 and 90 basis points too low currently against historic metrics as a result, the bank added.

European bonds have also faced a sharp sell-off in recent days, which BCA Mathieu Savary attributed to higher US rates “sucking capital” away.

“European yields will only stop their ascent once the US bond market calms down.”

“This will demand lower equity prices and an abnegation of profligacy by the incoming Trump administration.”

11.27am: Nasdaq to tumble as traders wipe Fed rate cut bets

Wall Street appeared on course for another grim day on Monday as traders wiped off bets for Federal Reserve rate cuts this year in response to Friday’s strong job market data.

Futures had the Nasdaq off 1.2% ahead of the opening bell, while the S&P 500 and Dow Jones were seen 0.8% and 0.4% lower respectively.

Each had faced steep declines on Friday as stronger-than-expected non-farm payroll figures hampered hopes for rate cuts.

Some 256,000 jobs had been added across the US economy in December, against the 155,000 anticipated, while unemployment unexpectedly fell from 4.2% to 4.1%.

Given the implied strength within the US economy, traders were no longer fully pricing in a Fed rate cut this year in response come Monday.

Inflation figures for December on Wednesday will be in focus as a result, with markets expecting the headline rate to have inched up from 2.7% to 2.8% and core inflation to have remained at 3.3%.

11.10am: European markets a sea of red

Negative sentiment swept across Europe on Monday, as the ongoing global bond sell-off continued to weigh.

France’s CAC shed 0.7% over the course of the morning, while Germany’s DAX dropped 0.6%, as Portugal’s PSI20 marked the only index on the continent to rise, by 0.5%.

Declines coincided with further increases in bond yields, including in both Germany and France, as jitters around the global economy continued into Monday.

“The sell off is global, and it appears to be about more than just inflation,” XTB analyst Kathleen Brooks noted.

“The increase in bond yields is due to multiple factors: inflation fears, public sector deficits and economic policy uncertainty, which are all driving yields higher and draining risk sentiment from financial markets.”

Sentiment had been hit on the back of expectation-beating US job market data last week, which saw bets for Federal Reserve rate cuts this year effectively wiped off.

“The Fed do not even have room to talk about rate cuts right now, which could aggravate risk aversion even more,” Brooks added.

10.51am: GSK, J&J bids mark big day for pharma deals

Monday marked a big day for pharmaceutical sector deals, with GSK PLC and Johnson & Johnson both having emerged in the spotlight. 

GSK announced plans to acquire the US biotech company IDRx for up to US$1.15 billion, including US$1 billion upfront, in a bid to expand its portfolio of cancer therapies… Read more

J&J was said to be in talks to acquire neuroscience-focused biotech firm Intra-Cellular Therapies for US$10 billion in the meantime… Read more

Shares in the former, which is set to acquire promising gastrointestinal stromal tumours drug IDRX-42, fell by 0.6% on Monday.

10.04am: British Airways owner tops fallers as FTSE slides

British Airways owner International Consolidated Airlines Group SA topped Monday’s fallers as a further surge in oil prices looked to add to pressure on airlines ahead.

IAG shares dropped 3.5% early on, with easyJet PLC also among the FTSE 100’s fallers as rivals Wizz Air Holdings PLC and Ryanair Holdings PLC also slipped.

The declines coincided with a further rise for oil on Monday, as benchmark Brent crude topped the US$80 a barrel mark for the first time since October.

Analysts have previously pointed to mounting headwinds from higher fuel prices for airlines as a result of the rise.

Hargreaves Lansdown’s Susannah Streeter added that Heathrow’s forecast for 84.2 million passengers this year, despite marking another record, pointed to slowing growth.

“With consumer-focused firms, especially in retail, forecasting uncertain times ahead, pessimism appears to be seeping into the travel industry too,” she said.

Pearson PLC, DS Smith PLC, M&G PLC and Rolls-Royce Holdings PLC were also among the fallers on Monday, while Rentokil Initial PLC, up 2.9%, headed the risers.

Overall, the FTSE 100 dipped 38 points to 8,210.

9.44am: Fed rate cut no longer fully priced in 

Markets are no longer fully anticipating an interest rate cut by the Federal Reserve this year after bumper job market figures on Friday.

According to Fed fund futures, a reduction over the course of 2025 was no longer being fully priced in by traders come Monday.

Figures on Friday had shown the addition of 256,000 jobs across the US economy in December, against 155,000 expected, alongside a surprise drop in unemployment from 4.2% to 4.1%.

Though the data signalled strength within the US economy, fears over stubborn inflation have also hampered hopes for interest rate cuts ahead.

Investec economist Philip Shaw highlighted concern around “disappointing” core inflation trends recently in last week’s Fed Open Market Committee minutes, which also showed “several members feared that the disinflation process might have stalled”.

Inflation figures for December on Wednesday will be in focus as a result, with markets expecting the headline rate to have inched up from 2.7% to 2.8% and core inflation to have remained at 3.3%.

9.26am: Heathrow trounces pre-pandemic passenger record

Heathrow Airport has confirmed that 2024 was a record year after enjoying its busiest-ever December.

Some 38.9 million passengers departed from the airport over the year, marking an increase of three million on the previous record in 2019.

Demand for Christmas and New Year getaways also pushed passenger numbers above the seven million mark in December, Heathrow added in a statement.

Christmas Day itself also saw a record 160,000 departures, reflecting another record, while 2025 was said to have got off well.

“With grey Mondays encouraging holiday bookings, 2025 is off to a strong start,” Heathrow said, forecasting 84.2 million passengers would pass through the airport over the year.

9.07am: Borrowing costs continue climb into new week

Borrowing costs remained on an upward trajectory as the new week of trading got underway on Monday.

Having hit their highest since 1998 last week on a sell-off sparked by fears around UK fiscal woes, 30-year gilt yields added another five basis points to reach 5.45% on Monday.

Yields on 10-year UK gilts climbed by a further six basis points to 4.89% in the meantime.

Concerns around slowing growth across the UK economy had prompted the sell-off, with the coinciding increase in government borrowing costs sparking fears that chancellor Rachel Reeves could be forced to row back on spending plans.

“That slowdown has been a direct reaction to government missteps,” Panmure Liberum analysts noted.

“Tax increases in the October Budget – however well-intentioned – have knocked the stuffing out of business confidence with insufficient countervailing enthusiasm. 

“Investors in UK government debt now suspect higher inflation and a weaker pound will be the near-term result of this policy mix. This makes UK government debt less attractive for a given interest rate.”

8.47am: PageGroup slides as hiring slowdown sees further cost-cutting

PageGroup PLC (LSE:PAGE) tumbled over 4% on Monday after signalling further cost cutting on another sharp drop in hiring over its latest quarter.

UK revenues fell by 13.6% in the quarter, in line with previous quarters, though Europe and Asia Pacific saw the biggest drops at 19.1% and 17.4% respectively.

Total gross profit (revenue) fell by 17.2% to £196.7 million for the quarter and for the year so far is down by 16.4% at $842.5 million.

PageGropup said it will continue to review its headcount to help cope with the current conditions… Read more

Shares in the FTSE 250-listed recruiter dropped by 4.4% to 297.6p.

8.38am: Pound continues to fall

Sterling tumbled further on Monday as a sell-off sparked by fears around the UK’s fiscal woes continued to hit.

Against the dollar, the pound fell by 0.58% to US$1.2138 on Monday to hit its lowest level since early November 2023.

Demand for options-trades that would pay out if the pound fell as low as US$1.12 had also topped that seen during the mini-Budget turmoil of 2022, according to Bloomberg.

Last week saw the pound sink 1.8% as borrowing costs surged, with 30-year gilt yields hitting their highest level since 1998.

Fears had built that chancellor Rachel Reeves would be forced to scale back on spending pledges with cuts or tax raises as a result.

Expectations for Bank of England rate cuts have also dropped recently over concerns around stubborn inflation, with markets pricing in 44 basis points of reductions for 2025 on Monday, against 50 basis points last Friday… Read more

8.09am: Entain surges but FTSE 100 drops

London’s blue chips kicked off the week in poor form, dropping 21 points to 8,227 at Monday’s open and almost fully wiping off last week’s gain.

M&G PLC (LSE:MNG) led the early fallers, down 3.4%, ahead of Melrose Industries PLC (LSE:MRO, OTC:MLSPF) and Rolls-Royce Holdings PLC (LSE:RR.).

Entain PLC (LSE:ENT) rallied by 8.7% in the meantime, after having come out to defence itself on the back of a 10% drop last week after rival warnings over customer-friendly sports results.

The Ladbrokes, Coral and Foxy Bingo owner said its financial outlook for 2024 was unchanged from its last update, which is for group earnings (EBITDA) to be towards the top end of its £1,040-1,090 million guidance range… Read more

Elsewhere, BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) ticked higher as trading got underway, in line with further gains for oil early on.

8.00am: Oil rallies further as US strengthens sanctions on Russia

Oil topped a four-month high on Monday as fears built around a new wave of US sanctions against Russian exports.

Benchmark Brent crude climbed as high as US$81.47 a barrel on Monday, before receding slightly to US$80.90 for a 1.5% gain over the day.

At Monday’s peak, oil was trading at its highest level since late August, taking gains to around 6% since midway through last week.

The US Treasury on Friday unveiled wider sanctions against Russia’s oil industry, targeting producers Gazprom Neft and Surgutneftegas, alongside some 183 vessels.

Exports to major partners China and India are set to be significantly hit, with the wider sanctions doubling the number of targeted Russian oil tankers.

“The latest actions are expected to counter the one million barrel per day oil surplus forecasted by the International Energy Agency this year,” Swissquote Bank analyst Ipek Ozkardeskaya commented.

7.44am: Sosandar flags strong Christmas and eyes road to profit

Sosandar Plc (AIM:SOS) has flagged strong Christmas trading and said it remains on course to turn a profit this year.

Third quarter revenue came in at £12.2 million, Sosandar reported on Monday, which was off the £14.3 million seen a year earlier, but up 50% on the first and second quarters.

Gross margins climbed from 58.3% to 64.7% year on year, driving a “continued positive swing in profit before tax trajectory”.

Partywear, alongside core knitwear and denim sales had been strong in the run up to Christmas, with Sosandar flagging positive traffic across its four stores and online.

Sosandar said it remained on course to match expectations for a full-year £1.0 million pre-tax profit, against a £0.3 million loss in 2023, “despite the well-publicised challenging macro-environment”… Read more

7.12am: Stocks to drop

Futures had London’s blue chips reversing on last week’s gains ahead on Monday’s open, with the FTSE 100 seen 19 points lower at 8,238.

The index had racked up a 24-point gain over the course of last week, despite a 71-point drop on Friday as expectation-beating US job data hit hopes for Federal Reserve rate cuts.

US markets took a beating on Friday as a result, with Asian markets also falling across the board overnight.

Back in London, FTSE 250-listed recruitment firm PageGroup PLC (LSE:PAGE) was set to be in focus on Monday.

5.00am: Monday’s schedule

PageGroup’s update kicks off a busy week of earnings on Monday, with the recruiter, alongside peer hays, set to offer clarity on job market conditions.

PageGroup and Hays’ updates are expected to reflect unease across the job market… Read more

Announcements due: 

Trading updates: PageGroup PLC (LSE:PAGE)

Finals: Hercules Site Services PLC

AGMs: 80 Mile PLC, Taylor Maritime Inc, Cap-XX Ltd 

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