LONDON MARKET OPEN: Travel Stocks Rise As Lufthansa Gets State-Aid

Tue, 26th May 2020 08:57

(Alliance News) - Stock prices in London opened sharply higher on Tuesday after the long UK bank holiday weekend, with airlines lifting the FTSE 100 as global travel restrictions begin to ease.

The large-cap index was up 113.98 points, or 1.9%, at 6,107.26. The mid-cap FTSE 250 index was up 395.59 points, or 2.4%, at 16,794.45. The AIM All-Share index was up 1.0% at 851.65.

The Cboe UK 100 index was up 1.7% at 10,317.40. The Cboe 250 was up 1.7% at 14,191.25, and the Cboe Small Companies was up 0.3% at 8,934.68.

In mainland Europe, the CAC 40 in Paris was up 1.1%, while the DAX 30 in Frankfurt was up 0.7%.

On the London Stock Exchange, British Airways parent International Consolidated Airlines Group was the best blue-chip performer, up 17%, while budget airline easyJet was up 11% amid optimism in the aviation sector. In the FTSE 250, Anglo-German travel operator TUI was the best performer, up 36%, while Ryanair Holdings was up 8.7%.

Foreign visitors to Spain will no longer have to undergo a two-week quarantine from July 1, the Spanish government has announced on Monday. IAG owns Spain's Iberia and Vueling airlines.

In addition, the German government and carrier Deutsche Lufthansa have agreed on a much-anticipated EUR9 billion bailout deal to help the airline cope with losses from the coronavirus pandemic, both sides announced on Monday.

Lufthansa wants to offer more flights again from June, a spokesman for the German airline told Bild tabloid's Sunday edition. Around 20 destinations are to be served again from Frankfurt in the second half of June, the Bild report said, including Heraklion on the Greek island of Crete, the Greek island of Rhodes, Dubrovnik in Croatia, Faro in Portugal, Venice in Italy, and Ibiza and Malaga in Spain.

Deutsche Lufthansa was up 6.3% in Frankfurt.

CMC Markets analyst Michael Hewson commented about Lufthansa: "The deal still needs to get the nod from the European Commission, who might impose a number of conditions in return for its approval, including the surrender of key flight slots. These types of rescue usually come with strings attached as UK bank Royal Bank of Scotland found when it was bailed out by the UK government in 2008. The bank was forced to sell a number of assets at fire sale prices including Worldpay, Direct Line, as well as spending years to try and sell off Williams and Glyns branches at a significant cost."

At the other end of the large-cap index, Whitbread was the worst performer, down 6.0% at 2,457.00 pence after JPMorgan slashed its price target on the hospitality firm to 2,000p from 2,800p.

In the FTSE 250, Aston Martin Lagonda was up 35% after the luxury carmaker confirmed Chief Executive Officer Andy Palmer has stepped down with immediate effect, and it has appointed Mercedes executive Tobias Moers as his replacement.

Palmer's position as chief executive has been the subject of speculation since billionaire Lawrence Stroll led a consortium that bought a 25% stake in Aston Martin last month, and then sold part of that to another consortium led by Mercedes-AMG Formula 1 team principal Toto Wolff.

Tuesday's announcement confirmed a report in the Financial Times newspaper on Sunday.

The pound was quoted at USD1.2264 Tuesday morning, up from USD1.2190 at the London equities close Friday.

The Japanese Nikkei 225 index closed up 2.6%. In China, the Shanghai Composite ended up 1.0%, while the Hang Seng index in Hong Kong is up 1.9%.

Japan late on Monday lifted a nationwide state of emergency over the coronavirus, gradually reopening the world's third-largest economy.

Meanwhile, China's plans to impose a new security law on Hong Kong will not erode freedoms, the city's leader said Tuesday, as she tried to reassure international businesses and investors alarmed by the proposal.

Chief Executive Carrie Lam said the controversial law would "only target a handful of lawbreakers" but she would not be drawn on what actions and opinions would be deemed illegal once the legislation is passed.

The euro was quoted at USD1.0918, up from USD1.0886 late Friday in London. Against the yen, the dollar was quoted at JPY107.84, firm from JPY107.51.

Oil was quoted at USD36.20 a barrel Tuesday morning, up sharply from USD34.72 late Friday. Gold was quoted at USD1,728.41 an ounce, soft from USD1,733.00.

The economic events calendar on Tuesday has US home sales data at 1500 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com