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Travel stocks lifted up by signs of economic recovery

Tue, 06/02/2020 - 12:56

It looks like favourable winds are returning for airline companies. The travel industry has been going through considerable turbulence since the COVID-19 pandemic began and travel restrictions put in place around the world. However, with air travel expected to resume shortly, shares of airline companies have surged in the stock market this week.

The travel rally took off in Europe on Tuesday, following Spain’s decision to reopen for tourism against the backdrop of a gradually recovering global economy. Spain is a desirable holiday destination, especially during the summer and the decision to lift the two-week quarantine for foreign travellers on 1 July has given some hope to its struggling tourism industry.

European travel operator TUI is up 25% after revealing plans to resume flights at the end of June. In a recent interview with the Rheinische Post, the CEO of the London-registered, German-headquartered company cited Spain’s decision to allow foreign tourists in July as a major cause for optimism. Iberia owner International Consolidated Airlines Group IAG jumped 20%, and InterContinental Hotels IHG went up 13% at the prospect of renewed mobility in Europe.

The growing optimism boosted indices across the continent: the FTSE 100 rose by 1.8%, the German DAX climbed 0.9% and the French CAC rose by 1.6%. In the UK, Prime Minister Boris Johnson confirmed the reopening of the retail sector amidst a scandal surrounding a top government aide flouting lockdown rules.

US airline industry gets second wind

Airline stocks in the United States also got a significant boost following the European recovery. Various US airlines have released details about their plans to resume travel with new safety measures in place. The US Global Jets ETF (JETS) shot up 16%, shares of United Airlines Holdings Inc. (UAL) surged 17%, with American Airlines Group Inc. (AAL), Delta Air Lines Inc. (DAL), Southwest Airlines Co. (LUV) JetBlue Airways (JBLU), and Spirit Airlines Inc. (SAVE) all lifting off with gains of between 14-22%.

Elsewhere in the world, Asian markets are recovering, with indices being boosted in China and Japan. People’s Bank of China Governor Yi Gang confirmed that the Chinese central bank would be ‘flexible’, and the Japanese government is preparing to roll out a stimulus package for economic recovery.

The overall positive market sentiment was boosted by the announcement from Novavax NVAX that they would be starting trials for a COVID-19 vaccine, which gained the pharma firm’s shares a 4.46% rise.

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