By Jack Denton
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 /zigman2/quotes/208070069/delayed UK:IAG +0.22% , Air France-KLM /zigman2/quotes/205396176/delayed FR:AF -0.87% , Lufthansa /zigman2/quotes/201210530/delayed XE:LHA -2.30% , Ryanair /zigman2/quotes/202851567/delayed UK:RYA +0.49% , EasyJet /zigman2/quotes/202825892/delayed UK:EZJ +0.59% , and Wizz Air /zigman2/quotes/210449062/delayed UK:WIZZ +1.75% were among the major risers in early 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 /zigman2/quotes/203800565/delayed FR:AC -2.65% and InterContinental Hotels Group /zigman2/quotes/202865596/delayed UK:IHG -0.75% also rose, but a number of the travel stocks that were boosted in early trading later moved into the red as European stocks took a turn negative later Tuesday.
On Monday, the executive branch of the EU recommended easing travel restrictions to allow tourists from more countries to enter the 27-member bloc.
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 /zigman2/quotes/202877789/composite PFE -0.48% , Moderna /zigman2/quotes/205619834/composite MRNA -1.92% , AstraZeneca /zigman2/quotes/200304487/composite AZN +0.57% , and Johnson & Johnson /zigman2/quotes/201724570/composite JNJ -0.47% .
“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 /zigman2/quotes/203180645/composite TWTR +2.25% . “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 turned lower on Tuesday. The pan-European Stoxx 600 /zigman2/quotes/210599654/delayed XX:SXXP -0.30% fell 1.43% while London’s FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.29% index was 0.67% down. The CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 -0.44% in Paris dropped 0.89% and Frankfurt’s DAX /zigman2/quotes/210597999/delayed DX:DAX -0.58% was 2.49% lower.
U.S. stocks faced a similar fate, with the S&P 500 /zigman2/quotes/210599714/realtime SPX +0.09% and Nasdaq /zigman2/quotes/210598365/realtime COMP +0.27% down, while Dow industrials /zigman2/quotes/210598065/realtime DJIA -0.05% fell more than 260 points by midday 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, while investors continue to eye inflation as a major concern for markets.
“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 buoyancy in European stock market indexes, with shares in Rio Tinto /zigman2/quotes/208934945/delayed UK:RIO +1.19% , BHP /zigman2/quotes/203323256/delayed UK:BHP +1.79% , Anglo American /zigman2/quotes/201381512/delayed UK:AAL +1.84% , Glencore /zigman2/quotes/201400686/delayed UK:GLEN +2.08% , and Fresnillo /zigman2/quotes/201300065/delayed UK:FRES -1.06% surging higher.
Major European-listed oil companies joined the commodities party and were among the other major risers in Europe, with shares in BP /zigman2/quotes/202286639/delayed UK:BP +1.91% , Royal Dutch Shell /zigman2/quotes/206428183/delayed UK:RDSA +2.70% , Total , and Eni /zigman2/quotes/209584888/delayed IT:ENI +1.02% lifting.
Shares in semiconductor group Infineon /zigman2/quotes/203152288/delayed XE:IFX -0.90% fell near 6%, 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 /zigman2/quotes/203376622/delayed XE:HFG -4.51% was another force dragging on European markets, with the stock down near 7% following the group’s quarterly earnings . The group confirmed the growth in revenue and adjusted earnings it preannounced in April.