FTSE 100 extends Santa rally to 3 days as travel and leisure stocks bounce back from recent sell off

by Jonathan Adams
FTSE 100

Despite last week’s sell off on the back of fears over the impact of the new Omicron variant of the Covid-19 virus the FTSE 100 looks set to conclude a pre-Christmas Santa Rally after three straight days of gains and a positive start to Thursday trading. London’s benchmark large-cap index is now up 1.27% over the past 5 days and holding onto gains of almost 12% for 2021 as we head towards the last few trading sessions of the year between Christmas and New Year.

ftse 100 index

Last week embattled travel, leisure and hospitality stocks received another unwelcome battering as fear over new lockdown restrictions gripped markets. However, the decision of the UK government to resist new lockdown restrictions until after Christmas and optimistic data suggesting the new variant is 40% less likely to end in hospitalisation has since eased nerves to some extent.

The FTSE 100’s three-day rally has been catalysed by gains for travel and leisure shares. Yesterday the British Airways owner IAG saw its valuation rise by 4.1% while the budget airlines EasyJet and Wizz Air also both gained 4.4% each. The Rolls-Royce share price also gained 3.3%. The company makes a significant portion of its revenues selling jet engines to civil aviation operators with service contracts for their maintenance.

In hospitality, Premier Inns owner Whitbread was up 3.1% yesterday while Intercontinental Hotels, which owns the Crowne Plaza and Holiday Inn brands, rose by 4%. Markets also appear to think the share prices of restaurant and pub groups have already priced in the Omicron damage and took the opportunity to buy back in yesterday. All Bar One owner Mitchell & Butlers was up 4.7% yesterday and JD Wetherspoons 3.3%. SSP, which runs cafes and other venues at railway stations and airports rose by 3.5%.

The London Stock Exchange’s more domestically focused FTSE 250 mid-cap index was also up 0.8% yesterday. However, a number of stocks going ex-dividend yesterday proved a drag on the major FTSE indices. Russian steelmaker Evraz dropped 3.3% after paying out its dividend, British American Tobacco was down 2.5% for the same reason and Halma, a British global group of safety equipment companies that makes products for hazard detection and life protection, slid 0.6%.

Barring a surprise plunge this afternoon, the LSE looks set to record a 2021 Santa Rally. The term refers to the phenomenon of stock markets historically gaining over the days before Christmas in a significant majority of years.

This article is for information purposes only.
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