Airlines’ stocks have risen on reports that the US is looking to ease travel restrictions on vaccinated passengers from the UK and the EU.
In the UK, shares in British Airways owner IAG rose 11%, making it the top spot in the FTSE 100, while engine maker Rolls-Royce came in second with shares up more than 5%. The shares of the German airline Lufthansa and Air France-KLM rose by around 7%.
The rises followed reports that the Biden government is ready end a travel ban for tourists entering from the UK and the EU imposed by Donald Trump in March last year.
“IAG shares have soared on reports that the US will be easing restrictions on travelers from the UK and the EU,” said Neil Wilson, senior market analyst at Markets.com. “The BA owner IAG is a clear winner, as its transatlantic business has been practically mothballed since the grounding of its jets due to US policy.”
It was a rocky day for markets in general, however, as investor fears increased over rising inflation, weaker global growth and the risk of debt-ridden property developer contagion in China Evergrande.
Europe’s Stoxx 600, a pan-European index of listed companies, lost 1.8% on Monday afternoon. The UK’s FTSE 100 fell more than 70 points, or 1%, to 6,891.
In Germany, France and Italy stocks fell more than 2% and in Spain by 1.2%. US markets also opened lower, with the Dow Jones down 1.6%, the S&P 500 down 1.5% and the tech-heavy Nasdaq down 1.8%.
Analysts warned that rising energy costs and wider inflationary pressures could jeopardize global economic recovery from lockdown at a time when growth in several advanced economies was slowing.
Central banks, including the The US Federal Reserve and Bank of England will provide updates this week, with expectations from financial market investors for a gradual withdrawal from emergency pandemic incentives at a sensitive time for Covid-19 economic recovery.
Walid Koudmani, market analyst at online trading company XTB, said, “Investors will be keeping an eye on the central bank’s upcoming decisions later this week, along with any new developments in the Chinese real estate market that could potentially create a domino effect. ”
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The annual rate of UK inflation rose the most in August from the previous month, reflecting a rapid rebound from last year’s lockdown, as well as a sharp rise in food, beverage and energy prices.
Wholesale gas and electricity bills have has risen to a record level has pushed several small utility companies into administration in recent months and threatens to boil over into a cost of living crisis for British consumers this winter.
It comes as investors sounded the alarm about contagion risks in China’s heavily indebted real estate sector that could spread to world markets after Evergrande stocks slumped on Monday to an 11-year low.
The country’s second largest real estate developer faces a debt settlement deadline this week as the company scrambles to restore confidence in the company.
Experts warn the company, which gives builders, investors and home buyers $ 300 billion
Analysts said any downturn in China would impact demand for natural resources as China is the world’s largest consumer of many commodities, with worrying parallels to 2015, when fears of China’s debt problems sparked a widespread sell-off in financial markets.
Russ Mold, Investment Director at Manchester-based stockbroker AJ Bell, said, “There is a lot to worry about in the market, and those who argue that the markets look frothy see some of that froth as one The brewing crisis in China is disappearing and gas prices are rising in Europe and concerns about stagflation are leading to falling stocks. “
