Daily market update: Ibstock, Ryanair

Asian markets may have bounced back at the start of the week, but UK stocks dipped on Monday,

After last week’s bruising showing for AI-related stocks, South Korean and Chinese names made a modest recovery, while US futures pointed to a positive start on Wall Street when trading opens on Monday, including for the tech-heavy Nasdaq index.

The market’s attention might be caught up with events in US politics this week as the results of the midterm elections land. While short-term noise can create volatility, historically their influence on the markets in the long term has been modest.

The FTSE 100 was dragged lower by energy names as Brent crude oil prices retreated from their recent highs on hopes for diplomatic progress in the Middle East. On the flipside, this helped provide a lift for aviation and tourism-linked names, while retailers made some modest progress.

Ibstock

In a sign of how downtrodden UK housebuilding is right now, brickmaker Ibstock’s earnings guidance has been smashed to pieces.

Ibstock has issued a major profit warning, with the shares likely spared even greater damage only because they’ve already been under severe pressure.

It was telling to see chief executive Joe Hudson peg some of the demand issues on delays to the new state-backed Your First Home scheme which doesn’t begin in earnest until April 2027 – vindicating the ultimately negative market reaction to the housebuilders in the wake of the Budget.

The drop in sales volumes in the third quarter is genuinely alarming, more than a fifth below management expectations.

Inevitably, the company has responded by slashing production, but it has substantial fixed costs, and this only exacerbates the negative impact on its profit.

Earnings were already heading in the wrong direction as far as the market’s concerned in the first half, and it looks like things are getting worse as the second half draws on.

Understandably, Ibstock is battening down the hatches and focusing on cash generation to build up a buffer to get it through this difficult period. It will hope, like its customer base, that the property market picks up in 2027 but ultimately it has very little control over its trajectory.

Ryanair

Dan Coatsworth, Head of Markets at AJ Bell, comments:

Travellers should brace themselves for a sharp increase in the cost of flying unless oil prices fall substantially from current levels.

Many airlines have navigated this year’s oil price spike thanks to forward hedging, having locked in large swathes of fuel costs before the Iran war drove up energy prices. Those hedges will soon roll off, meaning the airline industry faces significant cost pain.

The natural response will be to jack up prices and to cut back on capacity, but that might not be enough to offset the extra costs.

It’s possible that baggage charges go up, onboard food and drink costs increase, and airlines seek to operate with fewer staff and freeze the wages of those who do get shifts.

Ryanair says its fuel bill could go up by €2 billion in its financial year to March 2028. It must dig deep to find cost savings, such as pleading with airports to reduce fees and taxes, and using more AI to improve office productivity.

The scale of the potential cost hike casts a dark shadow over Ryanair’s second quarter results which showed it flew more passengers and generated more revenue, but neither grew by as much as operating costs.

Ryanair is no stranger to navigating difficult environments and while it may experience some pain near-term, the business has form in emerging triumphant from challenging situations. Customers are going to have to lump it when it comes to the extra cost of flying. It’s unlikely that they will be able to go to a rival and make significant savings as the entire industry is in the same boat.