UK’s new quarantine rules on arrivals from Spain derails travel sector comeback

“Equities took a small step backwards at the start of the new week including a 0.4% decline in the FTSE 100 to 6,098. The UK market was dragged down by weakness in telecoms, consumer cyclicals and financials. Among the stocks rising, miners, utilities and technology firms were most in demand,” says Russ Mould, Investment Director at AJ Bell.

“The gold price hit a new record high of $1,943 per ounce as investors sought to protect some of their wealth by putting money in supposed safe-haven assets. The precious metal has seen a strong rally this year thanks to considerable economic uncertainty, ongoing geopolitical tensions in various parts of the world and a global pandemic.

“The DAX index in Germany managed a small gain of 0.1% but Madrid’s IBEX 35 fell 1.4% as the UK’s new quarantine measures put a spotlight on Spain’s struggles with coronavirus.”

Airlines & other travel-related companies

“The UK’s decision to impose quarantine measures on people arriving from Spain is the news the travel industry hoped would never happen. Firstly, it shows the Government is finally capable of taking decisive action to stop the spread of coronavirus rather than simply monitoring the situation from the sidelines. Secondly, it shows the clear risks to the travel industry that its recovery will not be a smooth ride.

“Shares in airlines, cruise operators, holiday sellers and service companies linked to the travel sector have slumped following the weekend’s new rules on Spanish travel. The market is now pricing in the risk of restrictions on more countries and thus raising the potential for earnings estimates to be downgraded once again for travel-related industries.

“Many people don’t want to risk having to go through 14 days of quarantine after their holiday, particularly those who cannot work from home, and so it seems likely the Spain-related news will prompt more people to cancel their overseas trip this summer. It may also cause more people to think twice about booking a last-minute holiday.

“Airlines are already desperate for business, running promotions for cheap flights and holidays. They need to boost cash flow by encouraging more people to book trips, whether for this year or next, and they want to send a message that the travel sector is back open for business.

“The Government imposing restrictions puts a spanner in the works and effectively derails their strategy for clawing back some of the losses experienced earlier this year.”

Travel-related companies' share price movement 27 July (first hour of trading)

TUI -14%
EasyJet -12%
International Consolidated Airlines -10%
Ryanair -7%
Carnival -8%
On The Beach -4%
Wizz Air -4%
SSP -4%
InterContinental Hotels -4%
Trainline -3%

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