Carnival misses Q1, shares edge lower

The news shaping the markets today

Two “super powerful bombs” rocked Ukraine’s port city, Mariupol, on Tuesday, amid a fresh rescue attempt by Ukrainian authorities. Geopolitical tensions drive the US dollar index higher this morning.

Argentina’s central bank increased its “Leliq” interest rate by 200 bps to 44.5% at its March meeting, representing its third rate hike this year. However, the ARS/USD forex pair remained under pressure due to strength in the US dollar.

South Korea’s producer prices rose 8.4% year-over-year in February, slowing from the 8.9% increase in the earlier month. The country recording the lowest producer inflation since September 2021 sent the KRW/USD pair higher in forex trading this morning.

The American Petroleum Institute a decline in US crude stockpiles of 4.28 million barrels in the week ending March 18, following an increase of 3.754 million barrels a week ago. WTI crude oil prices rose after the news.

The Richmond Fed composite manufacturing index jumped to 13 in March, versus February’s reading of 1, which helped the Dow Jones record a gain of around 250 points on Tuesday.

What’s happening: Shares of Carnival declined on Tuesday, after the company reported weaker-than-expected results for its first quarter.

What happened: The spread of Omicron negatively impacted recovery in the travel sector.

Carnival missed first-quarter expectations and projected a net loss for the second quarter. However, the company still expects to return to profits in the back half of the year.

How were the results: The cruise operator reported revenue growth for the first quarter, but both top- and bottom-line metrics missed market views.

Revenues grew sharply to $1.62 billion, from $26 million in the year-ago quarter, but missed market expectations of $2.26 billion.
The company recorded a net loss of $1.9 billion, or $1.66 per share, versus Street estimates of a loss of $1.28 per share.

Why it matters: The spread of Omicron resulted in lower bookings and higher cancellations of reservations in the quarter.

Carnival said that costs had risen significantly due to high inflation level and costs related to restarting its operations. The company’s operating costs and other expenses doubled to $3.1 billion. However, operating loss narrowing slightly to $1.49 billion, from $1.52 billion in the year-ago quarter.

A sharp increase in fuel costs due to the Russia-Ukraine crisis is impacting the company’s overall business.

In December last year, Carnival had said it expects its full fleet to be operational by spring of 2022. However, management now expects this to happen only in summer. While saying that advance bookings had declined to the lower end of its historical range for the second half of 2022, the company expressed optimism around bookings being at the high end of the range for the first half of next year.

Carnival was earlier projected to return to positive monthly EBITDA (earnings before interest, taxes, depreciation, and amortization) during the second quarter. However, the company now said it sees adjusted EBITDA turning positive during the summer.

How shares responded: Carnival’s shares fell 0.1% to close at $18.93 on Tuesday, following the release of quarterly results. The stock has lost around 12% year to date.

What to watch: Investors will keep an eye on the Russia-Ukraine situation, as the company’s cruises can no longer stop at Russian ports. Moreover, the war-induced spike in fuel prices will also remain in focus

The markets today

The British pound will be in focus today ahead of a basket of economic reports from the country

Context: The GBP/EUR forex pair surged to a two-week high on Tuesday, while the British currency also recorded sharp gains versus the US dollar.

Details: Ahead of new budget plans from UK’s finance minister Rishi Sunak, the Office for National Statistics said that the country’s public borrowings had contracted by more than 50% from the pandemic levels. However, debt servicing costs are rising sharply.

Borrowing for the first 11 months of fiscal 2021-22 was £138.4 billion, down 52% from the record £290.9 billion from April 2020 to February 2021.

Sentiment was also supported by data showing a rise in the Confederation of British Industry’s order book balance to 26 in March, exceeding the consensus estimate of 16.

Meanwhile, markets expect the Bank of England to raise its interest rate 2.0% by year end.

Against the euro, the British pound gained to its highest level since March 8. The EUR/GBP settled at £0.8304 on Tuesday. The GBP/USD also rose to its strongest level since March 4, with the forex pair settling higher at $1.3262 on Tuesday.

London’s FTSE 100 also climbed to its highest level since February 25th, amid a surge in energy stocks.

What to watch: The ongoing conflict between Russia and Ukraine will remain a major concern for traders.

Traders also await economic data on inflation rate, producer prices and retail price index from the UK today. UK’s annual inflation rate, which rose to 5.5% in January to record the highest level since March 1992, is expected to accelerate further to 5.9% in February. Output prices are expected to increase to 10.1% year-over-year in February, from 9.9% in January, while the headline rate of input prices is projected to increase to 13.9%, from 13.6% in the previous month. Retail price inflation in the UK, which accelerated to 7.80% in January, is expected to rise to 8.2% in February.

Other Markets: US indices closed higher on Tuesday, with the Dow Jones, S&P 500 and Nasdaq 100 up by 0.74%, 1.13% and 1.94%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Turkey’s consumer confidence indicator, Eurozone’s consumer confidence indicator and ECB non-monetary policy meeting, South Africa’s inflation rate, US MBA mortgage applications, new home sales, crude oil inventories, gasoline inventories, heating oil stocks and distillate stockpiles, India’s money supply M3, Canada’s wholesale sales, Russia’s industrial production and producer price inflation, as well as Argentina’s leading economic index, balance of trade, GDP growth rate and unemployment rate.