Investor Alert

London Markets

May 4, 2021, 11:55 a.m. EDT

FTSE 100 outpaces European indexes, lifted by airlines, commodity stocks and manufacturing data

By Jack Denton

The key British stock market index outpaced its European peers on Tuesday, led higher by travel and commodity stocks, as optimism was also buoyed by upbeat manufacturing data.

The FTSE 100 (FTSE:UK:UKX) , the index of London’s top stocks by market capitalization, was 0.7% lower after spending much of the day in the green, ahead of most other major European indexes, which were deeper into the red. The relative outperformance of the FTSE 100 on Tuesday came after British markets were closed for trading on Monday due to a holiday.

While the broader narrative remains one of economic optimism driven by the diminishing severity of the COVID-19 pandemic, with investors continuing to watch inflation as a risk to markets, airline stocks got a boost from plans to reopen Europe to wider travel.

On Monday, the executive branch of the European Union recommended easing travel restrictions to allow tourists from more countries to enter the 27-member bloc. 

Read more: EU proposes reopening external borders as vaccination campaigns pick up speed

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 (NYS:PFE) , Moderna (NAS:MRNA) , AstraZeneca (NAS:AZN) , and Johnson & Johnson (NYS:JNJ) .

“News that the European Commission is taking steps to reopen the continent in time for the summer travel season is lifting risk appetite,” said Sophie Griffiths, an analyst at Oanda. “Furthermore, Britain’s expected announcement of a green list for countries that people can travel to is adding further support to travel and tourism stocks.”

U.K. trade minister Liz Truss told Sky News on Tuesday that a “green list” of countries that Brits could travel to without having to isolate upon return is set to be released shortly.

Shares in airlines IAG (LON:UK:IAG) — which owns British Airways — and easyJet (LON:UK:EZJ) took off in London trading, with EasyJet (LON:UK:EZJ) InterContinental Hotels Group’s (NYS:IHG) stock also lifting before falling below flat in later trading.

“Adding to the upbeat mood, data revealed that U.K. manufacturing activity hit a 27-year high in April,” Griffiths added.

The IHS manufacturing purchasing managers index rose for the 11th straight month in a row in April to hit 60.9 — the highest reading since 1994.

Other stocks contributing to the FTSE 100’s relative strength were companies exposed to commodities prices.

“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.

Plus: Is there a new commodity supercycle? Maybe not, these analysts say.

Metals and mining stocks Rio Tinto (LON:UK:RIO) , BHP (LON:UK:BHP) , Anglo American (LON:UK:AAL) , Glencore (LON:UK:GLEN) , Polymetal International (LON:UK:POLY) , and Fresnillo (LON:UK:FRES) all surged, as did shares in major oil companies BP (LON:UK:BP) and Royal Dutch Shell (LON:UK:RDSA) .

Technology stocks added weakness to London’s key index, with shares in industrial software group Aveva (LON:UK:AVV) , online grocery and robotics logistics group Ocado (LON:UK:OCDO) , and food-delivery player Just Eat Takeaway (LON:UK:JET) all sinking.

Link to MarketWatch's Slice.