Airlines lag wider rally, as Heathrow becomes most expensive airport

US markets are leading the push higher, with tech continuing to outperform. Meanwhile, UK airline stocks are being hit hard after a 53% rise in Heathrow fees.

• US markets lead the push higher.

• Tech outperforming despite rising yields.

• Airlines lag as Heathrow becomes the world’s most expensive airport.

US markets are helping to drive European indices higher, as fears over rising inflation and the impending period of monetary tightening are put on the back burner for now. UK banking stocks remain a key focus as we close in on a November rate rise, with markets now pricing in an 82% chance of a 25-basis point hike. However, US tech stocks continue to outperform, with Apple gains helping to drive the wider indices higher in the wake of their latest product unveiling. The latest unveiling of two new laptops and a third generation of Airpods does bring some optimism at a time that has seen investors concerned over just how hard the recent supply-chain issues could dent sales at the tech giant. Notably, the past week has seen tech outperform despite rising Treasury yields, highlighting easing concerns that monetary tightening will drive a swift move from growth to value.

Airlines are on the back foot once again today, with sharp losses for IAG, Tui, and EasyJet dragging down the wider FTSE index. Rising UK Covid cases and the recent emergence of the Delta plus strain do provide a little cause for concern, although there remains hope that the successful vaccination drive should help protect the travel sector from any further disruptions. However, news that Civil Aviation Authority (CAA) has approved a whopping 53% rise in Heathrow airport fees make the airport the most expensive in the world. That is a particularly difficult pill to swallow for airlines that have been hoping to raise prices in a bid to improve margins and regain lost lockdown earnings.