Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“It’s a tentative start to December as European markets are awash in Santa red. The FTSE 100 is desperately clinging on to breakeven, led lower by Melrose. Its CFO succession plan has raised eyebrows, with incoming finance chief Ross McCluskey bringing a CV that includes leadership roles at Inchcape and a stint as Group CFO at Intertek. Defence stocks are also among today’s laggards, with the sector under pressure after Donald Trump struck an optimistic tone on a potential Ukraine peace deal. In Europe, Airbus shares are sliding after Friday’s announcement of immediate repairs on 6,000 A320-family aircraft, a sweeping recall that touches more than half of the global fleet (more on that story below).
Growing activist interest in Greggs has put the baker in the limelight. Capital allocation is firmly under the microscope. Lauro Asset Management has criticised management, calling for at least £20 million in annual cost savings and a share buyback. They argue that a 44% year-to-date share price decline leaves Greggs vulnerable to a private equity approach at only a modest premium to today’s depressed levels. Adding intrigue, Silchester International Investors has quietly built a 5% stake, now Greggs’ largest shareholder – an activist-friendly register if ever there was one.
Oil prices climbed nearly 2% this morning, with Brent closing in on its highest price in over a week, after OPEC+ reaffirmed plans to freeze production increases through the first quarter. The move comes as the group wrestles with uneven demand and looming oversupply risks, while traders weigh fresh geopolitical tension following US warnings over Venezuelan airspace. Still, upside looks limited with hopes for a Russia-Ukraine peace deal that could unlock sanctions and flood the market with additional supply.”
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“Thousands of Airbus aircraft had to be grounded for maintenance after it was discovered that intense solar radiation could have corrupted onboard flight control software. The issue is limited to roughly 6,000 planes in the A320 family – the company’s best-selling aircraft. While this sounds bad on the face of it, the fix for the most part is relatively simple – just install an older version of the software. This process takes around 2-3 hours per aircraft, and Airbus has already confirmed that the vast majority of aircraft have now received the necessary modifications.
For some older aircraft, around 900 planes, the fix will require a hardware change before they can fly again, which could take several weeks due to limited supplies. This is likely to bring additional costs for either Airbus or Thales, as the latter was responsible for developing the affected software. It’s not yet clear who will have to foot the bill when all is said and done, but in a worst-case scenario, the impact is expected to be limited to a few tens of millions of euros. Airbus shares fell 2% this morning, and investors would do well to look through this noise. The financial impact is easily tolerable for Airbus should it have to cover the costs, and with such a strong market position and demand outlook, Airbus remains an attractive investment opportunity.”
