U.K. Domestic Stocks Jump With Travel Shares on Reopening Plan

U.K. domestically oriented stocks gained on Tuesday as travel and entertainment shares surged after Prime Minister Boris Johnson announced plans to reopen the economy.

The FTSE 250 index of mid-cap U.K. shares jumped as much as 1.4%, paring its gains to 0.2% by 11:18 a.m. in London, after Johnson pledged to ease lockdown rules in stages over the next four months, including the possibility of international trips restarting as soon as May 17. The outperformance was especially pronounced as the European benchmark Stoxx 600 fell 1.2%.

The news brought relief for cyclical and domestically oriented companies that have been suffering during the past year of the pandemic as lockdowns weighed on economic growth and consumer spending. Johnson is facing pressure to move faster in his reopening plans after the economy endured its deepest recession in more than 300 years.

U.K. Domestic Stocks Jump With Travel Shares on Reopening Plan

“The news will be the light at the end of the tunnel for the services side of the economy, where the restrictions on close-contact industries have been devastating,” said Oliver Blackbourn, a multi-asset portfolio manager at Janus Henderson.

EasyJet Plc rose as much as 12% after ticket sales more than quadrupled in the hours after Johnson outlined a roadmap for a return to air travel. Wizz Air Holdings Plc jumped as much as 5.9% while Ryanair Holdings Plc also advanced.

Retailer WH Smith Plc, which operates stores in airports and train stations, was up as much as 8.2%, while hotel and restaurant chain owner Whitbread Plc climbed as much as 4.9%. SSP Group Plc, which offers catering and concession services, jumped as much as 22%.

“We are seeing a sharp acceleration in the reopening trade,” said Karim Moussalem, head of cash equities at Cantor Fitzgerald Europe in London. Within travel and leisure, “it’s pretty clear that some panic buying is occurring,” he said by phone.

The prospect of the economy’s reopening and acceleration of the vaccination program are bringing more fans to equities in the U.K., which according to Bank of America Corp.’s fund manager survey is the world’s biggest underweight stock market.

BlackRock Investment Institute’s strategists debuted an overweight call on U.K. equities this week, saying that the evaporation of uncertainty over a Brexit deal should remove the risk premium from U.K. assets. They also favor U.K. large caps as an “attractive play” on the global cyclical recovery.

©2021 Bloomberg L.P.

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