Travel stocks rose sharply on Tuesday amid confidence that the economic threat of the Omicron coronavirus variant was fading even as record numbers of new cases were reported in the UK, France, Italy and US.
US cases in a single day were 1.08m, according to Johns Hopkins University, while the UK recorded almost 219,000 cases, France hit close to 300,000 and Italy registered 170,000.
But with the virus causing fewer hospitalisations than previous waves, investors bought into companies most at risk from lockdowns and travel restrictions. The London-listed budget carrier Wizz Air gained 12 per cent, British Airways owner IAG rose 11 per cent and easyJet added 9 per cent by the close.
German tour operator Tui rose 10 per cent, while Ryanair gained 8 per cent and other European airlines including Lufthansa and Air France added to gains made in the previous session on Monday.
UK prime minister Boris Johnson said there “was a chance to ride out this Omicron wave without shutting down our country once again. We can keep our schools and our businesses open, and we can find a way to live with this virus.”
The European Stoxx 600 travel and leisure index also rose more than 3 per cent on Tuesday to its highest level since late November before Omicron was declared a variant of concern by the World Health Organization.
“The global theme in markets is that we have reached peak Covid,” said Roger Lee, head of UK equity strategy at Investec.
Shares in big US airlines followed Europe higher as investors shrugged off thousands of flight cancellations caused by Covid-related staff absences and severe weather to focus on improved longer-term prospects.
The technology-focused Nasdaq Composite fell 1.6 per cent, as shares in companies typically viewed as beneficiaries of pandemic curbs declined.
Chinese ecommerce group Pinduoduo fell more than a tenth, while JD.com dropped 7 per cent, and Okta and Peloton traded more than 6 per cent lower. Zoom Video Communications slipped more than 5 per cent. The Nasdaq had climbed 1.2 per cent on Monday as Apple became the first company to reach a market capitalisation of $3tn.
The tech decline accompanied a second day of heavy selling in the $22tn US Treasury market, pushing yields on 10- and 30-year government debt higher. But given inflation expectations remained relatively unchanged at the start of the year, investors and strategists said the moves reflected confidence in the economic recovery and the ability of central banks to tame rising prices.
Traders have welcomed early data that Omicron may cause less severe illness than previous coronavirus strains, while new findings added to evidence that current vaccines hold up against severe Covid-19 outcomes.
Airline and tourism shares have been particularly sensitive to disruption and are still trading well below pre-pandemic levels, but they have recovered sharply since mid-December. IAG and easyJet have surged 25 per cent since then.
“These stocks went seriously low back in December . . . so people are getting away from that extreme negativity,” said Alex Irving, an aviation analyst at Bernstein.
Germany added to…