Travel stocks rise in Europe as broader markets languish

2 days ago 22

Airline stocks flew higher on Tuesday, as the European Union moved to welcome foreign tourists to the region, a sign that more normal travel and tourism conditions can resume as COVID-19 vaccinations become more widespread.

Shares in British Airways owner IAG IAG, +2.12%, Air France-KLM AF, +1.00%, Lufthansa LHA, +3.05%, Ryanair RYA, -0.18%, EasyJet EZJ, +3.23%, and Wizz Air WIZZ, -0.57% were among the major risers in European trading, as hopes rose for a recovery in the travel industry, which has been badly hit by the COVID-19 pandemic. Shares in major hotel groups Accor AC, +0.92% and InterContinental Hotels Group IHG, -0.39% also rose.

On Monday, the executive branch of the EU recommended easing travel restrictions to allow tourists from more countries to enter the 27-member bloc. 

Read more: EU proposes reopening external borders as vaccination campaigns pick up speed

Under the European Commission’s proposal, people who have been fully vaccinated against COVID-19 with an EU-approved vaccine or who come from a country with “a good epidemiological situation” will be welcome to the region. The EU has approved vaccines from Pfizer PFE, +3.05%, Moderna MRNA, +4.03%, AstraZeneca AZN, +1.19%, and Johnson & Johnson JNJ, +1.52%.

“Time to revive [the EU’s] tourism industry and for cross-border friendships to rekindle — safely,” said European Commission President Ursula von der Leyen, via Twitter TWTR, -1.16%. “We propose to welcome again vaccinated visitors and those from countries with a good health situation.” 

“But if variants emerge we have to act fast: we propose an EU emergency brake mechanism,” she added. Currently, visitors from only seven countries with low infection rates can enter the EU for nonessential reasons.

Travel stocks added lift to European stock markets, which were mixed on Tuesday. The pan-European Stoxx 600 SXXP, -0.07% was just below flat while London’s FTSE 100 UKX, +0.44% index was 0.5% higher. The CAC 40 PX1, +0.18% in Paris climbed 0.2% and Frankfurt’s DAX DAX, -0.67% was 0.6% lower.

Dow industrials futures YM00, -0.02% were pointing down around 25 points, set for a soft open after rising 238 points Monday to close at 34,113.

The broad narrative of economic optimism driven by the diminishing severity of the COVID-19 pandemic in many countries continues to drive stocks higher.

“The catalyst for this latest move higher is chatter about a commodities supercycle with oil companies and miners higher as well as continuing optimism about the reopening of the global economy,” said Russ Mould, an analyst at AJ Bell.

Along with airlines, metals and mining stocks contributed to stock market gains in Europe, with shares in Rio Tinto RIO, +1.76%, BHP BHP, +2.20%, Anglo American AAL, +1.12%, Antofagasta ANTO, +0.56%, Glencore GLEN, +1.86%, and Fresnillo FRES, +4.66% surging higher.

Major European-listed oil companies joined the commodities party and were among the other major risers in Europe, with shares in BP BP, +2.39%, Royal Dutch Shell RDSA, +2.61%, Total TOT, +2.26%, and Eni ENI, +1.35% lifting.

Shares in semiconductor group Infineon IFX, -4.48% fell near 4.5%, despite the fact that the chip maker raised its guidance for revenue and margins for the current fiscal year. The group said that it faces some supply constraints following the temporary shutdown of one of its plants in Texas.

Online meal-kit provider HelloFresh HFG, -4.71% was another force dragging on European markets, with the stock down near 4.5% following the group’s quarterly earnings. The group confirmed the growth in revenue and adjusted earnings it preannounced in April.

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