Wednesday 3 June 2020 10:49 am

FTSE 100: Travel stocks surge as Europe reopens borders

The FTSE 100 jumped in morning trading with airlines surging as Europe reopened some of its borders after coronavirus lockdowns.

London’s index of the 100 biggest UK companies rose 1.5 per cent to 6,310 points, putting it close to a three-month high. The rise was powered by countries across Europe reopening or planning to reopen their borders to international travel.

Read more: Italy opens borders to European tourists as coronavirus lockdown lifts

European stocks followed the FTSE 100 higher. Germany’s Dax surged 2.4 per cent and France’s CAC was 2.1 per cent higher. The continent-wide Stoxx 600 rose 1.5 per cent.

Asian stocks also pushed up to near three-month highs. Global investor sentiment was boosted by survey data that showed China’s services sector returning to growth.

Michael Hewson, chief market analyst at CMC Markets, said it had been an extraordinary rally in recent weeks. He said stocks seem “to be able to shrug off anything that can be thrown at them”.

The key driver of the rise, he said, was massive central bank fire power supporting the markets in “a bonanza of cheap money”. European investors are hoping that the European Central Bank will unleash more tomorrow.

On top of this, markets over the last two weeks have been fuelled by countries’ moves to lift their coronavirus lockdowns. That has helped companies whose shares were in the doldrums, such as travel firms, energy companies, and banks. 

Airlines lift FTSE 100

The trend continued on the FTSE 100 today. British Airways-owner IAG was the biggest riser, surging more than eight per cent. Easyjet also jumped, rising six per cent.

Travel stocks were boosted by Italy today reopening its borders to international travellers. Germany said it will lift a travel ban for EU states plus Britain, Iceland, Norway, and Switzerland from 15 June.

A statement from Portugal’s tourism board that it is working to ensure it can soon welcome Brits cheered FTSE 100 investors.

Energy firm Centrica was the second-best performer this morning, jumping by seven per cent. BP and Shell both rose almost four per cent as the oil price rally continued.

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Jim Reid of Deutsche Bank said there had been a “value-growth rotation”. Growth stocks such as the tech giants previously led the rally. But they are now losing out to value stocks such as lenders that are trading at big discounts.

Joshua Mahony, senior market analyst at trading platform IG, said: “Ultimately this recent rebound for value has been borne out of an overwhelming optimism in anticipation of reopening measures throughout Europe.”

Oil prices rise as China data improves

Investor sentiment received a further boost today when survey data showed that the Chinese services sector returned to growth in May. The purchasing managers’ index gauge rose to its highest in a decade.

The survey data helped push oil prices higher as investors bet on higher demand. Brent crude climbed 1.3 per cent to $40.10 per barrel. WTI crude, which in April was in negative territory, rose 1.9 per cent to $37.50.

Saxo Bank’s chief economist Steen Jakobsen said: “The rally remains supported by the prospect of a now priced in Opec+ cut extension when the group meet virtually later this week.”

He added: “The V-shaped recovery that the stock markets continue to signal also raising the prospect for increased demand.”

Read more: Oil prices at three-month highs ahead of Opec meeting

The dollar continued to slip this morning. It fell 0.3 per cent on an index against other currencies. Sterling rose along with the FTSE 100, climbing 0.3 per cent to $1.259.

Fiery protests have raged in the US for eight days over the police killing of black man George Floyd. But the dollar’s drop was largely due to investors selling the safe-haven currency in favour of equities. US stocks were set to open higher, according to futures prices.