FTSE 100 rises as retail sector prepares to reopen
The UK’s FTSE 100 closed higher after investors welcomed Boris Johnson’s plans for the phased reopening of the retail sector.
London’s blue-chip index closed 1.28 per cent at 6,069 points, as the retail sector prepared to re-open in mid-June.
In the Downing Street briefing last night, the Prime Minister said there will be a formal assessment of easing the lockdown restrictions on Thursday as part of the legal review.
However, he revealed plans to allow outdoor markets and car showrooms to open from 1 June. He added that he intends to allow all other non-essential retail, including department stores and independent shops, too reopen from 15 June.
European markets also opened higher as investors welcomed another positive economic reading out of Europe. Germany’s Dax jumped nearly three per cent before closing up 1.21 per cent, after the German GFK consumer climate data beat its forecast. France’s Cac ended the day 1.71 per cent higher.
Overnight, the Nikkei led gains in Asia, hitting a ten-week high, as Asian stocks jumped on optimism over the loosening of lockdowns around the world.
Investors were buoyed by news that American biotech firm Novavax had started the first human study of its experimental coronavirus vaccine.
The company said it expects initial results on responses in July. It comes on the back of biotech company Moderna’s recent report of a positive development in its vaccine trial.
Russ Mould, investment director at AJ Bell, said: “Whether this relief rally can last will depend on whether the easing of containment measures can be achieved without a second spike in coronavirus infections, and until then further volatility in these sectors cannot be ruled out.”
Travel stocks lead FTSE 100
Travel stocks performed well on the back of a combination of the planned reopening of European holiday destinations and the German government’s bailout for Lufthansa.
Tui was the FTSE 100’s biggest riser, as shares surged more than 50 per cent after the Spanish government said tourists will be allowed entry “in safe conditions”. Chief executive Fritz Joussen welcomed the news and said the July return of Spanish tourism is a “good signal”.
British Airways owner IAG closed up 22.5 per cent, while Easyjet rose more than 19.63 per cent following reports that the German government had agreed a bailout plan with Lufthansa.
Neil Wilson, chief market analyst at Markets.com, said: “Strength in this sector underscores confidence among investors that economies are reopening, and consumers are keen to travel.”
“There is a lot more hope that travel restrictions across Europe will be eased in time for the summer holidays. If the summer holiday season can be saved it would be a big plus after most of us wrote it off. “
Additionally, automotive stocks were buoyed by news car showrooms can open from Monday. Shares in automotive retailer Pendragon jumped 11.9 per cent in early trading, followed by car dealership chain Lookers, which rose nearly nine per cent.
Aston Martin shares surged 30 per cent after it confirmed it had parted with chief executive Andy Palmer. Senior Mercedes executive Tobias Moers will replace Palmer in August.
Wilson said: “Aston Martin has been one of the worst stock listings in living memory. In spite of rocketing higher today they are still worth a tenth of the IPO price – listing at about £5.50 today they are worth 45p.”
Joshua Mahony, senior market analyst at IG, said: “The outperformance of those within the travel and tourism space highlights the influence the impending lockdown easing is having upon market sentiment.”
“To some extent it feels like we are turning things on their head, with risk-on sentiment driving those riskier and heavily sold stocks such as IAG, Carnival, and Rolls-Royce into huge double digit gains.”