FTSE rides travel rally as Covid holiday curbs set to ease

Travel businesses drove UK stocks higher on Friday ahead of an expected overhaul of restrictions, though the retail recovery showed more signs of slowing down.

Travel businesses led UK stocks higher on Friday ahead of an expected overhaul of restrictions, though the retail recovery showed more signs of slowing down.

The FTSE 100 rose 21 points, or 0.3%, to 7,049, putting the index on track for a modest 0.3% weekly gain.  

Ministers will consider easing England’s coronavirus rules for international travel on Friday, with the complex traffic light system set to be simplified and requirements for returning tourists from many destinations to take costly PCR tests  scaled back.

‘This would remove a huge blockage for the industry, though what hoops you need to go through once you get to your destination is another matter,’ said Neil Wilson, analyst at Markets.com.

With changes paving the way for a rush of holiday bookings ahead of October half-term, British Airways parent International Consolidated Airlines (IAG) jumped 3.6% to 148p while aerospace engineer Roll-Royce (RR) rose 2.3% to 112p.

Among ‘mid-caps’, travel group TUI (TUI) gained 3.8% to 296p while Upper Crust-owner SSP (SSP) was up 3.3% to 264p on the prospect of travellers grabbing more food on the go. Gains were not universal across the sector though, with EasyJet (EZJ) continuing its recent nosedive and slipping 1% to 601p.

Natural resources businesses were the weakest performers on the FTSE, as oil and other commodities pulled back. Anglo American (AAL) slumped 3.7% to £27.15 while Rio Tinto (RIO) declined 2.3% to £48.95.

A further slowdown for UK retail was the other big news, with sales volumes falling 0.9% in August following a 2.8% drop in July, the Office for National Statistics reported.

Analysts put that down to the ongoing rush to socialise in restaurants and pubs, although growing supply shortages were also a significant factor. Some commentators pointed out it could discourage the Bank of England from any move towards tightening monetary policy as it looks to safeguard the economic recovery at a meeting next week. 

There are fears that goods shortages could scupper what is otherwise expected to be a bumper Christmas for retailers after last year’s lockdown fiasco.

‘Christmas 2020 was a huge disappointment for many families and for many retailers and as long as restrictions don’t resurface, this festive season could be a record breaker,’ said AJ Bell analyst Danni Hewson.

The FTSE 250 index gained 128 points, or 0.5%, to 23,761, with Wickes (WIX) leading the charge. A string of analysts upgraded the retailer, sending its shares 4.1% higher to 247p, after expectation-beating results yesterday.

Among investment trusts, BH Macro (BHMG ) rose 3.1%, or 110p, to £36.40, from a 6% premium, after the Brevan Howard hedge fund won promotion to the FTSE 250, replacing Vectura Group which is being bought by Philip Morris. BHMG’s market value has been boosted to £860m following a merger with sister fund BH Global provoked by the fund manager’s demand for a hike in its fee.

SDCL Energy Efficiency Income (SEIT ) announced it had raised £250m in a heavily oversubscribed issue priced at 110.5p per share, having been targeting £175m. That will take the trust, whose shares rose 0.9% to 112.5p, to well over £1bn in size.

 

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