Industry Comment: Spanish Quarantine Rules Spark Airline Selloff
Joshua Mahony, Senior Market Analyst at IG, discusses latest airline news.
“The airlines are driving UK markets lower in early trade, with Ryanair losses highlighting the cost of grounded flights. Meanwhile, precious metals continue their ascent, with silver looking to play catch up after years of under-performance.
“The FTSE has kicked off the week on a somewhat hesitant tone, with simmering US-China tensions being accompanied by a major slump in travel related stocks.
“Once again, we are seeing the recent theme of dollar weakness come into play, with the upcoming FOMC meeting providing yet another driver of volatility as Powell & co seek to respond to the recent slowdown in the economic recovery.
“Gold has hit a fresh record high in early trade, with the recent out-performance in precious metals continuing apace today. However, while gold has managed to find a new all-time high, the fact that silver still needs to gain 107% to reach the 2001 peak does point towards a potential opportunity for catch-up.
“The airlines have led the loses in early trade today, with the likes of TUI, IAG, Dart Group, easyJet, and Ryanair all suffering after the swift UK decision to reimpose a 14-day quarantine on any flights from Spain.
“Whilst some will criticise the speed at which these measures have been imposed, it does show a willingness to act early in a bid to reduce imported cases in the UK.
“With Ryanair losing €185m over the April-June period, airlines desperately need a smooth summer as they bid to stabilise their balance sheet after months of losses.
“Unfortunately, this Spanish quarantine announcement is unlikely to be the last of its kind, with outbreaks throughout Europe likely to provide a stop-start summer for airlines as different regions attempt to extinguish any surges in Covid-19.”