Precise Investors

Friday, May 27, 2022
Stocks & Shares

London stocks lower after latest travel update

London stocks

The FTSE 100 closed the session down 0.61% at 7,064.35, and the FTSE 250 was off 0.57% at 22,802.40

Stocks in London remained below the waterline by the close on Thursday, with ex-dividend stocks a drag as investors digested the latest update on travel restrictions for holiday destinations.

The FTSE 100 closed the session down 0.61% at 7,064.35, and the FTSE 250 was off 0.57% at 22,802.40.

Sterling was in a mixed state, meanwhile, last trading 0.49% weaker against the dollar at $1.4102, as it strengthened 0.23% on the euro to change hands at €1.1632.

High hopes that brighter skies were in sight for the airlines have been brought back down to earth with a bump after the UK government brought in even stricter controls on key holiday routes, said Hargreaves Lansdown senior investment and markets analyst Susannah Streeter.

Far from beaming the green light on to more destinations, Portugal has been taken off the list, as infection rates increase in the country, she said. Caution is the name of the game for the British government, but it’s a hand dealt as a bitter blow to the travel industry.

Shares in British Airways owner IAG and budget carrier easyJet fell by more than 5% by mid-afternoon, Streeter noted, as the realisation dawned on investors that another summer washout could be on the way.

Tour operator TUI joined Ryanair and Wizz Air on the downside.

As aircraft stay grounded, cash burn is likely to intensify eating into the financial buffers the airlines have built up through debt restructuring and rights issues, Streeter said.

The situation is also being seen as a drag on the fortunes of Rolls-Royce, the aircraft engine manufacturer and supplier of maintenance for jets, as recovery in its commercial business retreats a little further on the horizon, she said.

She said there is still a glimmer of hope that swift vaccination roll outs will make way for a late summer revival in fortunes, but the travel industry is now going to have to play an even bigger game of catch up.

In economic news, a survey released earlier showed growth in the services sector hit a 24-year high in May as coronavirus restrictions eased.

The IHS Markit/CIPS purchasing managers’ index for services rose to 62.9 from 61.0 in April, coming in ahead of the initial estimate of 61.8 and marking the strongest rise in business activity since May 1997.

A reading below 50.0 signals contraction, while a reading above indicates expansion.

The composite PMI, which includes the manufacturing sector, rose to 62.9 in May from 60.7 the month before, coming in above the flash estimate of 62.0.

It also marked the steepest rate of expansion since the series began in January 1998.

UK service providers reported the strongest rise in activity for nearly a quarter-century during May as the rollback of pandemic restrictions unleashed pent up business and consumer spending, said Tim Moore, economics director at IHS Markit.

He said the latest survey results set the scene for an eye-popping rate of UK GDP growth in the second quarter of 2021, led by the reopening of customer-facing parts of the economy after winter lockdowns.


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