Presented by the Finimize Community

Hi John, here's what you need to know for October 11th in 3:12 minutes.

☕️ Community member Jules Bordat Finimizes over a slow down and relax tea at Brunches Cafe in Singapore (29°C/85°F ⛅️)

⏳ Keep it brief

Storm Ahead

What’s Going On Here?

Delta Air Lines reported third-quarter results which cruised past investors’ expectations on Thursday – but shares of the world’s largest air carrier fell after it pointed to turbulence up ahead.

What Does This Mean?

Just last week, Delta gave investors a sneak peek into the captain’s cabin: the airline said it’d generate third-quarter earnings per share of up to $2.30 – and it duly delivered two cents more than that on Thursday. But investors are fastening their seatbelts for this quarter: the company expects its non-fuel costs to rise 5% versus the same time a year ago, with higher wages largely to blame. And despite declining oil (and in turn jet fuel) prices since this time last year, Delta’s other costs mean its investors might need to brace for a lower fourth-quarter profit than they expected.

Why Should I Care?

For markets: Please remain calm.
Some investors rushed to their nearest exit – Delta’s stock fell 4% – and others might be about to follow. The airline’s stock has risen by more than its peers’ since Boeing’s 737 MAX 8 was grounded in March, making Delta – which doesn't use them – the first port-of-call for forlorn travelers. But with Boeing’s 737s possibly back in the sky by January, investors might be concerned about Delta’s plans to grow its own fleet. Increased supply without increased demand should push flight prices lower next year. So if Delta wants to keep hold of those new customers, it might have to be the first to cut its prices, potentially putting next year’s profit at risk.

The bigger picture: There’s no easy way out.
EasyJet is facing a similar challenge. This week, the budget British airline announced it’d probably earn more than expected this year, thanks to strikes at rival airlines. But with competitors lining up to take bankrupt Thomas Cook’s place on the runway, investors worried about next year’s growth sold off its shares.

A Close Shave

What’s Going On Here?

Data released on Thursday showed the UK economy shrank by 0.1% in August compared to July – but upward revisions to earlier data suggest the country has managed to avoid a recession. Cracking news, lad (tweet this).

What Does This Mean?

Economists had predicted that the British economy in August would be the same size as in July, so the shrinkage – although slight – was likely a disappointment. But Thursday’s update also showed economic growth in June and July was higher than initially measured, partly thanks to refreshed (and more accurate) readings from the all-important services industry.

The British economy shrank in the second quarter of this year. But July’s higher growth has offset August’s decline – and barring a dramatic collapse in September, third-quarter economic growth is all but guaranteed for the UK. That’ll be a relief for investors: if the economy shrank this time around, it would’ve technically been in a dreaded recession.

Why Should I Care?

For markets: A grand day out.
The value of the British pound rose against the US dollar on Thursday, but – fortunately for existing UK stock market investors – perhaps not by enough to turn foreign investors off British stocks (which also rose slightly). Typically, a more expensive currency might dissuade international buyers, given that their cash doesn’t go as far. But now there’s no immediate recession in the offing, British companies may have had a better third quarter than expected.

The bigger picture: The curse of the were-Brexit.
A relatively muted investor reaction to Thursday’s release suggests they’re waiting on economy-shaping Brexit updates before committing to anything. First-quarter economic growth got a boost from companies that stockpiled goods before the UK’s planned-then-postponed March exit from the European Union. But a lack of repeat purchases then shrank the second quarter. The UK’s trade terms with Europe, likewise, will affect companies’ manufacturing, purchasing, and hiring decisions – in turn driving their earnings and the economy as a whole.

💬 Quote of the day

– Thomas Jefferson (American statesman, diplomat, lawyer, and Founding Father, chosen by Finimizer Jules Bordat)