UK sectors hit hardest by lockdown show sharp rise as big tech shares fall on Wall Street
UK travel and hospitality companies set to benefit from the easing of Covid restrictions rallied on the London stock market after Boris Johnson set out the government’s roadmap for ending lockdown in England.
Against a backdrop of rising hopes for a rapid economic recovery from the worst recession for more than 300 years, shares in companies among those hardest hit by lockdown, including airlines, travel firms and operators of retail, food and drink outlets at train stations, recorded the biggest gains amid growing hopes for a fast return to relative normality.
Shares in airlines and travel firms rose after a surge in holiday bookings on Monday night following Johnson’s announcement of a possible return to international travel from 17 May, subject to a government review.
EasyJet said flight bookings from the UK jumped 337% and package holiday bookings surged 630% compared with a week earlier, with Málaga, Alicante and Palma in Spain, Faro in Portugal and the Greek island of Crete among the top destinations. August breaks were the most popular, followed by July and September. Boris Johnson ‘very optimistic’ all Covid restrictions will end on 21 JuneRead more
The budget airline ended the day up 4.5%, while the holiday travel firm TUI was up 3.5%. British Airways’ owner International Airlines Group rose by almost 2%.
Cineworld gained 9.5% on hopes that cinemas will reopen in mid-May, as outlined by Johnson, while SSP Group soared 17% as investors bet on a pickup in sales at its Upper Crust and Caffè Ritazza stores once holidaymakers and commuters return to airports and railway stations. Bingo specialist Rank Group was up 6%.
Amid the prospect of outdoor drinking resuming from mid-April, followed by indoor hospitality from 17 May, shares in the cidermaker C&C Group jumped 9%. Premier Inn owner Whitbread edged closer to reversing stock market losses racked up since the start of the pandemic, while pub chain JD Wetherspoon also reached levels last seen a year ago.
Property companies with big office and retail assets were also in demand. British Land, the company behind shopping centres such as Meadowhall and Drake Circus and offices such as Broadgate in the City, was the biggest riser in the FTSE 100, up more than 5%. Land Securities, which has London office developments and the Bluewater mall, was up more than 4%.
The government is reviewing whether to change its work-from-home guidelines from June.
Richard Morawetz, a vice-president at the rating agency Moody’s, said the gradual easing of restrictions – assuming there is no reversal – would boost earnings for companies that rely more on free movement, such as tourism, retail and leisure activities.
“This will be reinforced by the rollout of the vaccination programme, which will boost consumer confidence and consumption in the sectors that have been most affected by lockdowns,” he said.
The lockdown winners stood out on an otherwise mixed day for the financial markets; the FTSE 100 rose by 0.2% to reach 6,625, while the more domestically-focused FTSE 250 rose by 0.4% to 21,057.
The pound rose by 0.3% against the dollar to trade above $1.41 for the first time in almost three years, fuelled by optimism over the UK’s vaccination programme and hopes for a faster economic recovery.
Meanwhile, on Wall Street, shares in large tech companies slid amid fears that valuations had risen too far after a stellar performance in the past year, and as the prospect of higher inflation looms as the world economy recovers from Covid-19.
Tesla was among the biggest fallers, dropping 11% at one point but ending the day down just over 2%. Its shares were dragged down further by a slide in the value of bitcoin because of the carmaker’s $1.5bn bet on the cryptocurrency announced earlier this month. Bitcoin has plunged by about 20% in less than two days, dropping below $50,000 from a record high of $58,000 on Sunday.
Testifying at Congress Jerome Powell, the chair of the US Federal Reserve, struck a cautious note over the prospects for the world’s largest economy and said support from the central bank was still needed as it emerged from the pandemic. That promise of support cheered investors and markets recovered some of their earlier losses.
Sean Darby, global equity strategist at the US bank Jefferies, said the UK government’s reopening plans represented “much further progress” than most other economies that the bank analyses.
“As pressure on the healthcare system abates there may be room for a faster relaxation in social restrictions thereby allowing some of the worst areas of the economy and UK market to rebound.”
Source: The Guardian