London close: Buoyant travel plays help positive finish

The FTSE 100 ended the session up 1.3% at 7,121.88, and the FTSE 250 was ahead 1.13% at 22,909.32.

Sterling was also in the green, last trading 0.44% stronger against the dollar at $1.3847, and rising 0.27% on the euro to €1.1670.

“Concerns about the global economic recovery have weighed on equity markets this week, due to rising Delta variant cases in Asia, which has prompted Japan to implement a state of emergency, and South Korea tightening restrictions prompting increased volatility and weakness in stocks more broadly,” said CMC Markets chief market analyst Michael Hewson.

“These concerns have also seen bond yields slide back with the US 10-year yield sliding for the second week in succession over worries that the recovery is either in trouble, or merely being delayed.

“Much will depend on how quickly those countries where cases are rising, can speed up their vaccine rollout plans in order to limit the scale of the various lockdown and travel restrictions.”

Data released earlier by the Office for National Statistics showed that economic growth slowed to 0.8% in May from a revised 2% in April, coming in well below expectations for 1.5% growth.

April’s figure was revised down from 2.3%.

It marked the fourth consecutive month of growth, and left the economy 3.1% below where it was in February 2020, before the Covid-19 pandemic hit.

The services sector was the biggest contributor, with growth of 0.9%, after indoor hospitality was allowed to reopen in May.

Accommodation and food service activities grew by 37.1%.

The production sector saw growth of 0.8% in May, mainly because of adverse weather conditions boosting output in electricity, gas and air supply.

Meanwhile, the construction sector contracted for the second month in a row, by 0.8%, but remains 0.3% above its pre-pandemic level.

The manufacturing of transport equipment fell by 16.5%, suffering its largest drop since April 2020 as microchip shortages disrupted car production.

“Pubs and restaurants, who were again able to welcome indoor guests, were responsible for the vast majority of the growth seen in May,” said ONS deputy national statistician for economic statistics Jonathan Athow.

“Hotels also saw a marked recovery as restrictions were lifted.”

Paul Dales, chief UK economist at Capital Economics, commented that the “muted increase” in GDP in May was “especially disappointing” at a time when some more timely indicators suggested that the economic recovery lost some verve in June.

“This may mean that the recent rise in Covid-19 cases and the delay to the final easing in Covid-19 restrictions is hampering the recovery.

“Of course, the pace of the recovery was always going to slow as the economy climbed back towards its pre-crisis level. But we hadn’t expected it to slow so much so soon.

“As such, whereas we previously thought that GDP would return to its pre-crisis peak in August, October now looks a better bet.”

During the afternoon, it also emerged that airlines and an airport operator had launched legal action against the UK government around the decision-making used by Westminster in coming up with rules on overseas travel.

Manchester Airports Group (MAG), which owns East Midlands, London Stansted and Manchester airports, is leading the complaint, with support from easyJet, British Airways owner IAG, Ryanair and TUI.

The firms said that, despite the announcement of a relaxing of travel rules to allow fully-vaccinated travellers to avoid quarantine on return from ‘amber list’ countries, it was still unclear how the government was classifying destinations under its ‘traffic light’ system.

“British consumers need to understand how decisions are made so they can confidently plan their travel, which is why we are asking the government to provide the data and advice that is underpinning its decision making,” the chief executive officers of MAG and the four air operators said in a statement.

In equity markets, luxury fashion brand Burberry rose 3.82% after an upgrade to ‘buy’ at Goldman Sachs, which pointed to a more attractive risk/reward profile.

Outsourcer Bunzl was boosted 3.61% by an upgrade to ‘buy’ at Berenberg, which said the stock’s recent relative underperformance had run its course, and the shares were "attractively valued".

Vectura Group shares surged 14.01% after tobacco giant Philip Morris swooped for the UK pharmaceuticals company with a £1.045bn recommended offer.

The 150p-a-share offer trumps a 136p offer from private equity group Carlyle in May that valued Vectura, which focuses on inhaled medicines, at £958m.

Polymer manufacturer Victrex advanced 2.32% after it said full-year results could be at the upper end of market expectations as it reported a rise in third-quarter revenue.

On the travel front, British Airways and Iberia owner IAG added 1.92%, easyJet ascended 1.79%, Wizz Air gained 1%, and WH Smith was 3.24% higher, after the government announced that fully-vaccinated Britons returning home from amber list countries would no longer have to self-isolate.

“While this is arguably the biggest reduction in the UK’s international travel barriers, there remain obstacles from ongoing restrictions on UK residents entering many countries worldwide,” said broker Liberum.

“Assuming the UK policy changes are not reversed, and are largely reciprocated by other countries, UK-exposed airlines are likely to have a reasonable opportunity to generate some cash for a short period this summer.”

Market Movers

FTSE 100 (UKX) 7,121.88 1.30%
FTSE 250 (MCX) 22,909.32 1.13%
techMARK (TASX) 4,478.03 0.81%

FTSE 100 - Risers

Evraz (EVR) 614.80p 5.45%
BHP Group (BHP) 2,262.00p 4.34%
Anglo American (AAL) 2,991.00p 4.27%
Rio Tinto (RIO) 6,106.00p 4.09%
Burberry Group (BRBY) 2,063.00p 3.82%
Glencore (GLEN) 319.50p 3.82%
Intermediate Capital Group (ICP) 2,146.00p 3.67%
Bunzl (BNZL) 2,556.00p 3.61%
Barclays (BARC) 173.36p 3.41%
Legal & General Group (LGEN) 265.80p 3.38%

FTSE 100 - Fallers

Just Eat Takeaway.Com N.V. (CDI) (JET) 6,412.00p -4.29%
Rentokil Initial (RTO) 505.20p -1.36%
B&M European Value Retail S.A. (DI) (BME) 545.00p -0.66%
Avast (AVST) 495.30p -0.62%
Reckitt Benckiser Group (RKT) 6,426.00p -0.45%
Admiral Group (ADM) 3,113.00p -0.35%
Flutter Entertainment (CDI) (FLTR) 12,900.00p -0.23%
Croda International (CRDA) 7,640.00p -0.10%
Fresnillo (FRES) 800.60p -0.07%
Unilever (ULVR) 4,297.00p -0.05%

FTSE 250 - Risers

Vectura Group (VEC) 154.40p 14.01%
Ferrexpo (FXPO) 444.00p 4.77%
Watches of Switzerland Group (WOSG) 905.00p 4.62%
Aston Martin Lagonda Global Holdings (AML) 1,927.00p 4.12%
Bodycote (BOY) 880.50p 3.70%
Inchcape (INCH) 803.50p 3.60%
Synthomer (SYNT) 520.50p 3.58%
Essentra (ESNT) 295.00p 3.51%
Vistry Group (VTY) 1,221.50p 3.34%
Unite Group (UTG) 1,145.50p 3.34%

FTSE 250 - Fallers

Just Eat Takeaway.Com N.V. (CDI) (JET) 6,412.00p -4.29%
Centamin (DI) (CEY) 102.80p -2.52%
CLS Holdings (CLI) 247.50p -1.78%
Computacenter (CCC) 2,642.00p -1.57%
Oxford Biomedica (OXB) 1,366.00p -1.45%
TUI AG Reg Shs (DI) (TUI) 357.00p -1.33%
XP Power Ltd. (DI) (XPP) 5,470.00p -1.26%
Helios Towers (HTWS) 162.60p -1.09%
Mitie Group (MTO) 66.30p -1.04%
Bytes Technology Group (BYIT) 459.20p -0.99%