Written by Norman Isaac Mwambazi

Airline stocks rise in Europe as Germany eases travel restrictions on visitors from U.K, Portugal

One of the sectors that were hit hard by the COVID-19 pandemic was the transport industry. From the road to …

One of the sectors that were hit hard by the COVID-19 pandemic was the transport industry. From the road to the water to the skies, companies in ride-hailing, cruising, and airlines were significantly affected by stay-at-home directives and travel restrictions. People were urged to stay home; some from highly infected countries were denied entry, while those that were allowed to travel to travel had to first test before travelling, self-isolate, and quarantine for up to 14 days at their cost making travel in the pandemic even more expensive. Fewer people are travelling, which means companies’ earnings getting affected and their stocks going down.

Now that we have COVID-19 vaccines being administered to people across the globe, travel stocks are picking up and recovering from the ruins of the pandemic as countries open their borders to travellers.

One such country that has eased travel restrictions is Germany, and this has had a ripple effect on stocks in Europe. Late on Monday, Germany’s national disease control centre, the Robert Koch Institute, revealed that with effect from Wednesday, July 7, 2021, the United Kingdom (UK), Portugal, India, Nepal, and Russia will be removed from the country’s highest risk category of “virus variant areas” and move into the second-highest category of “high-incidence areas.”

This means that inbound travellers who are fully vaccinated and those with COVID-19 antibodies will not be required to quarantine upon arrival in Germany as it has been in the past. In addition to that, travellers who have not yet been vaccinated but test negative for COVID-19 after five days of arrival won’t have to isolate for 10 days.

The decision comes only a few days after Germany Chancellor Angela Merkel had held talks with UK Prime Minister Boris Johnson. The UK had been on Germany’s “virus variant areas” list since May 23. Merkel had been a strong proponent of the European Union’s call for careful travel restrictions in Europe intended to curb the spread of the more contagious delta variant of coronavirus.

European stocks

This decision has positively affected European stocks of airline companies after the opening of the trading session today, Tuesday, July 6, 2021. International Airlines Group (ticker: IAG), which owns airlines like British Airways from the UK, Vueling Airlines S.A and Iberia from Spain, Aer Lingus from Ireland, and also holds a 25.2% stake in Qatar Airlines, gained 1.63%. The company is listed both on the London Stock Exchange in the UK and the Madrid Stock Exchange in Spain. IAG has a market capitalisation of £8.94 billion ($9.51 billion), and its stock goes for GBX192.06 at the London Stock Exchange.

Other airlines that saw its stock rise are Lufthansa (ticker: LHA) from Germany, which gained 0.99%. Its stock is currently trading at €10.21 ($12.08) a share. Lufthansa owns Brussels Airlines from Belgium, Austrian Airlines from Austria, and Swiss International Air Lines from Switzerland, among others.

Low-cost carriers EasyJet (ticker: EZJ) gained 0.42%, Ryanair (ticker: RYA) gained 0.15%. However, Air France-KLM (ticker: AF) fell 1.54%, and Wizz Air (ticker: WIZZ) from Hungary fell 0.57% in the morning trading session.

Just like the easing of travel restrictions by Germany impacted airline stocks, these stocks also affected major European stock market indexes. Although they traded slightly lower this morning, they remained near all-time highs.

The European Stoxx 600 dropped by 0.1%, and the FTSE 100 was trading just below flat in London. In France, the CAC 40 fell 0.3% and in Frankfurt, German, the DAX fell 0.5%.

US stocks

In the US, stock futures looked like they will pick up from where they left off on Friday before going for an extended July 4 holiday that included Monday. The benchmark S&P 500, the Dow Jones Industrial Average, and the tech-heavy Nasdaq Composite Index were all trading near the flat line in the morning session.

It should be remembered that on Friday, July 2, 2021, these three major indexes surged to new record highs after the Labour Department released an optimistic jobs report for the month of June; that showed how the labour market is recovering at a faster than expected pace with job claims falling below 400,000 for the first time since the early days of the coronavirus pandemic last year.

Before market close on Friday last week, the S&P 500 SPX marked a seventh-straight record close for the first time since 1997. However, analysts noted that the macro picture for US stock markets remained unchanged.

Oil prices rise

Over the weekend, crude oil in the U.S. climbed higher after members of OPEC+ failed to reach a deal that was intended to increase oil output to match the increased demand for the product as the world recovers from the pandemic.

During the meeting, major oil-producing countries Saudi Arabia and the United Arab Emirates (UAE), had a stalemate over production cuts; therefore, no decision was ever reached.

Commenting on this, a team of strategists at Deutsche Bank led by Jim Reid noted that the UAE was asking for better terms from what was tabled in the meeting.  

“Indeed, the most noteworthy story after the long weekend was about the failure to reach a deal at the latest OPEC+ talks and how that sent prices up to fresh two-year highs. Some members of the group, including Saudi Arabia, had been hoping to increase production over the coming months; however, the U.A.E. had yet to agree and sought better terms that would change how its quota is calculated and allow it to produce more,” Reid said.

As such, crude oil prices rose to their highest in nearly two years. The international benchmark Brent is currently trading at $77.04 a barrel while West Texas Intermediate rose above $76.50.

In Europe, shares in the major oil companies followed suit. Shares of British multinational oil and gas company BP (ticker: BP) rose 0.29%, French company TotalEnergies SE (ticker: TTE) rose 0.35%, Royal Dutch Shell (ticker: RDSA) gained 0.81%, and Eni S.p.A (ticker: ENI) from Italy is 0.52% higher.