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High jet fuel prices delay travel return to normal

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Airlines brace for an uncertain future despite anticipating robust earnings for the third quarter, as escalating geopolitical tensions and rising oil prices cast shadows over the industry’s financial landscape.

In the wake of a bustling summer marked by record post-pandemic travel levels, major European carriers are preparing for impressive third-quarter earnings. Analysts predict strong demand continuing into the year-end, notwithstanding surging inflation and fuel costs. James Halstead, a noted aviation analyst, underscores the robust performance of transatlantic and intra-European sectors. However, he cautions that restricted flight capacities are a double-edged sword, potentially driving ticket prices up due to surging demand.

Despite optimistic forecasts, the industry faces significant headwinds. The recent Hamas attacks in Israel on October 7 have stoked geopolitical unrest, contributing to elevated oil prices and adversely affecting consumer sentiment in Europe. The ripple effect of these developments could impose a financial burden on airlines.

Financial forecasts for key players in the industry reveal this dichotomy.

Air France-KLM anticipates a 33% surge in operating income, reaching 1.37 billion euros, with a 7% increase in revenue. Similarly, IAG expects a 28% growth in pre-exceptional items operating results, while Lufthansa foresees a 24% rise in adjusted earnings before interest and tax.

Hamas attack

However, the oil market’s volatility remains a concern. Brent crude approached $94 a barrel post-Hamas attack, with jet fuel prices experiencing a 5% uptick since the incident.

This surge reminds of the record highs following Russia’s 2022 invasion of Ukraine.

Airlines are already feeling the pinch, with Ryanair’s CEO Michael O’Leary warning of ticket price hikes. Similarly, Finnair cited fuel costs as a contributing factor to its diminished earnings. According to CEO Topi Manner, sustained high jet fuel prices could further push fare limits.

The industry’s fate might hinge on airlines’ fuel hedging strategies, influencing ticket prices and profitability in the coming winter. However, the question lingers: will increased fares deter travel demand?

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Money

Federal Reserve lowers rates amid eased job market

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The Federal Reserve has cut interest rates by a quarter-point, bringing the benchmark rate to a range of 4.5% to 4.75%, as economic growth continues but job gains slow.

The Fed noted that labour market conditions have “generally eased,” even with low unemployment, signalling a more cautious approach amid a stable economic expansion.

The statement marks a shift in Fed language, now saying inflation has “made progress” toward the 2% goal instead of the prior “further progress.”

With inflation holding steady around 2.6%, policymakers aim to keep economic risks balanced, despite pressures from slower job growth.

This rate cut reflects a strategic move to sustain economic momentum while cautiously watching inflation’s gradual trend toward the Fed’s target.

The decision was unanimous, aligning Fed priorities with a balanced approach to support both employment and price stability.

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Money

Trump victory sparks market surge as Wall Street soars

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Donald Trump’s election victory has sparked a massive rally in the stock market.

Banks and industrial companies led the surge as investors bet that Trump’s plans for deregulation and tax cuts will boost economic growth.

Shares of big banks, like JPMorgan and Goldman Sachs, soared as investors predicted fewer regulatory restrictions.

Meanwhile, industrial giants such as Caterpillar and steelmakers like Nucor also hit record highs, reflecting optimism about U.S. manufacturing.

In contrast, clean-energy stocks took a hit, as Trump’s policies are expected to favour traditional energy sectors.

This surge comes amid rising Treasury yields and falling gold prices as investors gain confidence in the transition to a Trump administration.

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Money

Australian Treasurer and RBA chief clash over economy

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A rare dispute has emerged between Australia’s Treasurer Jim Chalmers and Reserve Bank Governor Michele Bullock over the nation’s economic trajectory.

Governor Bullock argues the economy remains overheated, even as growth data shows recent slowdowns.

Treasurer Chalmers, however, warns that sustained high interest rates are “smashing the economy.”

This debate is critical for Australians, as it will influence the future of interest rates and inflation.

Data shows a mixed economic picture: while inflation is down, it’s still above target, and the jobs market remains historically strong.

Ultimately, deciding who’s right may come down to theory and perspective on economic health.

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