Airlines soar despite FTSE 100 indecision

Markets are lacking direction today, with a host of economic data showing ongoing suffering despite tentative improvements. Meanwhile, airlines are regaining ground off the back of easyJet’s plans to start flying a select number of routes.   

• Markets lacking direction, with PMI gains continuing to show substantial contraction
• US jobless claims highlight huge disconnect between markets and the real economy
• Airlines find favour after easyJet sets out plans to start up flights

Recent market indecision has been evident throughout European and US equities today, with fortunes ultimately failing to result into anything particularly convincing in either direction. Once again we have seen economic data releases highlight the ongoing suffering that is playing out in response to this health crisis. PMI surveys throughout the globe highlighted an easing in the pace of the slowdown for most, yet things remain pretty bleak by historical standards. From the UK perspective, we should not get too carried away by the sharp rise for the critical services sector, for the new and improved figure of 27.8 represents the worst reading on record when removing the April reading. The  pound may have found some support today, yet the continued decline in business conditions coupled with a somewhat bleak Brexit outlook provides little basis to be bullish.

The weekly decline in US jobless claims has continued, with the 2.4 million initial claims representing the lowest weekly reading since this crisis began. However, the picture remains bleak despite the weekly decline in new claims, with continuing claims surging to a whopping 25 million. The impact of the coronavirus can be better viewed through the continuing claims sphere, with ongoing unemployment claims rising from 1.7 million to 25 million in the space of two months. The divide between Main Street and Wall Street is highlighted perfectly when noting that the S&P 500 is now just 12% below its February peak despite a fourteen-fold rise in jobless.

Airlines are finally finding some support this week, with easyJet plans to kick-start flights in early June bringing some optimism for the sector. Crucially, the airline plans to sell all seats, allaying fears that we will see huge cuts to load factor in the name of social distancing. Elsewhere, Dart Group has managed to obtain £170 million worth of finance, helping reduce concerns surrounding liquidity. While the sector remains in the firing line if wider market turns sour once again, the recent rise does highlight s shift away from safer recovery stocks and into more risky names.