| Europe's Discount Airlines Face Headwinds
Are Europe's budget airlines gearing up for an emergency landing? That's looking increasingly likely after British carrier EasyJet EZJ.L announced on Jan. 8 a 2.2 percentage point drop in its load factor, or proportion of seats filled, to 78.9% during December. The company's stock price fell 14% on Jan. 8—the biggest one-day drop since June, 2004—and continued to slide on Jan. 9, down 8% in late afternoon trading. To date, EasyJet's share price has fallen 25% in 2008, cutting its market valuation to $3.8 billion. The Luton (England)-based firm isn't the only one suffering from a post-holiday slump. Ryanair RYAAY, Europe's leading low-cost carrier, has seen its market capitalization fall 15% this year, to just over $8.6 billion. Shares in the Irish airline slid more than 6% on Jan.
January's Plunge Has Been Dizzying; Now, the Good News
Forget the "January effect," the traditional boost stocks got from new money flowing into the market after the new year. The few weeks of trading in 2008 have turned out to be among the worst ever for the stock market. And Monday's plummet in the global markets and yesterday's scary opening hours in the U.S. would seem to test the theory. But the day ended with U.S. stocks showing just modest declines. To be honest, I've never thought the January effect made much sense. Supposedly, stock prices are depressed by tax-loss selling before Dec. 31, and then bargain hunters rush in after the new year. But what about years in which there were few losses, and hence not much tax-loss selling? And why did stocks with big gains rise as much as those subject to tax-loss selling? Perhaps 2008 will also test the theory that stocks rise in election years.
Williams Pipeline Partners stay flat in first-day public trading
Williams Pipeline units, each priced at $20, ended their first day of trading at $20 apiece. In after-hours trading, the units shed 4 cents. That's relatively good news on a day when stocks dipped at the end of one of Wall Street's weakest weeks. "On a down day, they ended up not down," Tulsa portfolio manager Jake Dollarhide said. "I think it further reinforces Williams' reputation." Williams Pipeline is the first major initial public offering of the year. Bad economic news has pushed share prices down and sent other fledgling issues to the sidelines. In fact, Williams was the only one of three initial public offerings planned for this week that made it to market. "It's a very skittish market, and there are no do-overs," Dollarhide said. "When you do an IPO, you have one chance to raise money." Williams initially said it expected to price its new units between $19 and $21.
Sofa so bad for Land of Leather
Land of Leather has seen no respite from its post-Christmas sales slump, with trading throughout January proving just as disappointing. The sofa retailer announced this morning that trading was "unchanged" since January 4, when it reported that sales were significantly below expectations – a warning that sparked alarm across the furniture sector. This month is a key time for the company, as it makes a quarter of its sales between Boxing Day and January 31. Shares in the company fell 6% in early trading, to 60p, and analysts warned investors to be cautious even though the stock has fallen 80% over the last year. "Land of Leather continues to disappoint," said Kevin Lapwood of Seymour Pierce. "Any hopes of a pick-up over the sale period were not realised." On January 4, Land of Leather said that underlying sales over the first nine days of the post-Christmas sales had fallen by a quarter, a decline it blamed partly on the credit crunch.
Mexico stocks dip on US recession woes, peso firm
As long as the U.S. market continues with its rollercoaster ride, volatility will prevail in Mexico." Mexico's economy leans heavily on the United States, where it now ships an estimated 80 percent of its exports. The yield on the benchmark government 10-year peso bond <MX10YT=RR> slipped 3 basis points to 8.15 percent. In local stock trading, cellphone operator America Movil (AMXL.MX: Quote, Profile, Research), the most heavily weighted stock in the benchmark IPC index, dropped 1.16 percent to 31.61 pesos. Its New York-traded stock (AMX.N: Quote, Profile, Research) slipped 0.67 percent to $58.05. Financial group Inbursa (GFINBURO.MX: Quote, Profile, Research), owned by Mexican tycoon Carlos Slim, one of the world's richest men, ended among the top decliners, down 6.32 percent at 27.26 pesos.
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