The European and global markets experienced a volatile day following the surprise victory of Donald Trump in the 2024 US Presidential election. This unexpected outcome triggered significant shifts in various sectors, with some companies experiencing substantial share drops while others saw increased sales. The impact rippled across the Atlantic, affecting European equities, with some analysts expressing concerns about potential negative consequences from Trump’s anticipated trade policies. Conversely, other companies reported positive financial results, showcasing the continued resilience and adaptability within certain market segments amidst the uncertainty.
Key Takeaways: A Market in Flux
- Wizz Air’s operating profit plummeted by 33.2%, highlighting challenges within the European budget airline industry.
- Barclays strategists predict a negative outlook for European stocks due to Trump’s potential tariffs, even though some of this risk was already factored into the market.
- Adyen reported a 21% surge in third-quarter sales, demonstrating strong performance in the payments sector.
- Sainsbury’s, a major UK supermarket, maintained its profit outlook amidst economic uncertainty.
- Delivery Hero updated its profit forecast, indicating growth but also some challenges.
- The Federal Reserve is expected to cut interest rates again amid economic recalibration efforts, adding another layer of complexity to the post-election landscape.
- China’s stimulus plans are expected to increase in anticipation of potential additional tariffs from the US.
- Chinese EV stocks experienced further losses following Trump’s election.
Wizz Air’s Profit Dip: A Case of Cost Inefficiencies
Wizz Air, a prominent European budget airline, announced a significant drop in operating profit for the six months ending September 30th. The company reported an operating profit of €349.2 million ($375.9 million), a substantial 33.2% decrease compared to the €522.9 million earned in the same period of 2023. The airline attributed this decline to “cost inefficiencies” stemming from the grounding of 41 Airbus aircraft due to mandatory engine inspections. While the number of grounded planes has decreased from 46 at the end of June, Wizz Air forecasts an average of 40-45 grounded aircraft over the next 18 months, impacting operational capacity and profitability. Despite this setback, the company reported “positive momentum” in bookings and yield for the subsequent six months, a glimmer of hope amidst the ongoing challenges. However, their operations in Tel Aviv remain suspended until mid-January, adding another factor to their current financial challenges.
The Impact of Grounded Aircraft
The grounding of a significant portion of Wizz Air’s fleet underscores the complexities faced by airlines in managing maintenance schedules and unforeseen disruptions. Engine inspections, while essential for safety, represent a major expenditure that eats into profitability. The airline’s optimistic outlook for the coming months suggests a belief in the resilience of air travel demand, even in the face of economic uncertainty and ongoing geopolitical tensions.
Europe’s Stock Market Outlook: A Barclays Strategist’s Perspective
The unexpected win by Donald Trump has sent ripples of concern through European financial markets. Emmanuel Cau, head of European equity strategy at Barclays, voiced his apprehensions on CNBC’s “Squawk Box Europe,” stating, “I think Europe is seen as a loser of a Trump presidency.” He attributed this sentiment to the anticipation of Trump’s protectionist trade policies, particularly the reintroduction of tariffs that could negatively impact European businesses. Although Cau acknowledged that “a lot of that was priced in” given the market’s pre-election predictions, he emphasized that the situation remained “very weird” now that Trump officially assumed office. The contrast between the surge in US stocks following the election and the subsequent downturn in European markets further validates Cau’s concerns.
The Uncertainty of Tariffs
The potential implementation of hefty tariffs remains a source of profound uncertainty for European companies, especially those heavily reliant on the US market. The unpredictable nature of Trump’s economic policies adds fuel to the fire, making it difficult for businesses to plan strategically. Businesses’ ability to adapt and strategize will be critical to mitigating losses; many will need to find new markets, streamline operations, and potentially negotiate with US authorities to find solutions. This underscores the interconnectedness of the global economy and exposes Europe’s vulnerability to unilateral changes in US trade policy.
Adyen’s Strong Third-Quarter Results: A Bright Spot in a Turbulent Market
In stark contrast to the more pessimistic outlooks, Adyen, the Dutch payments firm, reported a significant surge in third-quarter sales. The company showcased a robust 21% year-over-year increase in net revenue on a constant currency basis, reaching €498.3 million ($535.5 million). This positive performance comes after a steep decline in August following a previous earnings miss. Adyen’s success indicates a rising market share and a successful diversification of its merchant mix, further demonstrating the resilience and growth within the payments processing sector.
The Payments Sector’s Strength
Adyen’s results highlight the enduring strength of the payments sector, which remains relatively insulated from the broader impacts of geopolitical uncertainty and fluctuating economic conditions. The consistent growth in online and in-store transactions continues to fuel demand for reliable payment processing solutions, contributing to the success of companies like Adyen. This provides a valuable counterpoint to some of the more negative news and highlights certain areas of the market that are less vulnerable to political risks.
Sainsbury’s Steady Performance: Navigating the UK’s Economic Landscape
Sainsbury’s, the UK’s second-largest supermarket chain, reported a 3.7% rise in retail underlying operating profit during the first half of its fiscal year, reaching £503 million ($650.7 million). This positive growth reflects strong volume growth in Sainsbury’s grocery offerings. The company maintained a confident outlook, projecting retail underlying operating profit between £1.01 billion and £1.06 billion for 2024/2025, exhibiting a growth trajectory of 5% to 10%. The company anticipates a more positive outlook for revenue within the second half of the fiscal year in part due to the positive performance of its Argos segment (general merchandise). This showcases the resilience of essential retail sectors in the UK, even amid wider economic challenges.
Delivery Hero’s Updated Forecast: Balancing Growth and Challenges
Delivery Hero, the Berlin-based food delivery giant, announced a significant 24% increase in third-quarter revenues, driven by substantial improvement in monetization. Its Gross Merchandise Value (GMV), a key metric reflecting the total value of orders processed through its platform, also saw a 9% year-over-year increase. The Middle East and North Africa (MENA) region was a particularly strong performer, contributing significantly to this growth. This is particularly important as Delivery Hero is planning an IPO of its MENA unit, Talabat, on the Dubai stock exchange later this year. Despite the overall growth, Delivery Hero issued updated guidance stating that they now expect full-year adjusted EBITDA to land at the lower end of its previous outlook, suggesting some continued challenges in cost management and regional market volatility.
The Federal Reserve’s Rate Cut and the Trump Factor
The Federal Reserve is anticipated to continue its rate-cutting strategy with another quarter-point decrease in its benchmark borrowing cost. This decision will directly impact financial markets and lending costs across various sectors. While the Fed’s focus remains on moderating inflation and addressing tightening in the labour market, Donald Trump’s election victory introduces an unexpected complication. There are numerous questions unanswered, including uncertainties about whether the Fed will react to Trump’s policies, and the uncertainty for the US – and by proxy the global economy – is a critical macro issue.
China’s Stimulus Response: Anticipating Potential Tariffs from the US
The prospect of increased tariffs under a second Trump administration has profoundly impacted expectations for China’s upcoming fiscal stimulus plans. Trump’s campaign included threats of imposing additional tariffs of 60% or more on Chinese goods. While previous tariffs imposed during Trump’s first term didn’t significantly alter US-China trade flows, significantly larger tariffs could cause an economic crisis for China, which is seeking to boost growth in addition to navigating a struggling real estate market and softer than anticipated consumer spending.
Chinese EV Stocks Suffer Post-Election Losses
The aftermath of the Trump election has negatively impacted Chinese electric vehicle (EV) stocks. Major players such as Geely Automotive, BYD Co, Nio, and Xpeng experienced significant losses on the Hong Kong stock exchange. Likewise, Xiaomi, a key Chinese electronics firm that recently made a foray into the EV market, also suffered share price declines. This outcome is likely linked to concerns about the potential impact of increased US tariffs on Chinese exports, particularly impacting sectors such as electric vehicles, and reflecting a broader market sentiment influenced by anticipated trade disruptions.
Conclusion: Navigating a New Era of Uncertainty
The financial markets are clearly reacting to the unexpected outcome of the US election. While some sectors, like payments processing, show continued resilience, other industries, such as European equities and certain Chinese manufacturing sectors, face considerable uncertainty. The coming months will be crucial to assess the actual impacts of Trump’s policies and how different market sectors respond to the evolving political and economic dynamics. The situation reinforces the fact that global markets are interconnected, and even seemingly isolated events can have far-reaching and unforeseen consequences.
