Airline stocks dealt a blow as Whitbread stands to gain from staycation boom.
Shares in the pair fell by 6% as the latest advice from the government made no additions to its green travel list, dashing hopes that some Mediterranean islands could be included.
Patience is now wearing thin with investors over the travel re-opening trade, particularly with the peak trading season less than a month away. British Airways owner IAG (LSE:IAG) led the FTSE 100 index fallers board with a drop of 5%, dragging engines giant Rolls-Royce (LSE:RR.) 2% lower.
The decline for easyJet in the FTSE 250 index takes its shares back to levels seen in April. The Luton-based carrier said last month it expects to fly around 15% of capacity in the June quarter but with the ability to flex up quickly to operate 90% of its fleet over the peak summer period.
The ongoing uncertainty, particularly with Portugal's place on the green list under threat, means families are more likely to write off going overseas this summer in favour of booking another staycation holiday, potentially boosting shares in Premier Inn owner Whitbread (LSE:WTB).
Fears over the spread of Covid-19 variants contributed to the downbeat mood of the London market as the FTSE 100 index gave up gains earlier in the week to fall 1% to 7,033. Stocks going ex-dividend, including National Grid (LSE:NG.) and Kingfisher (LSE:KGF), added to the pressure.
Speciality chemicals firm Johnson Matthey (LSE:JMAT) was one of just a handful of risers after analysts at Jefferies said the shares should be trading as much as 35% higher at 4,200p.
They believe that the market is being too sceptical about the earnings outlook in clean air and the company's exposure to energy transition materials. Shares rose 46p to 3,118p.
Defence manufacturer Chemring (LSE:CHG), a specialist in countermeasures and energetics, led the FTSE 250 after accompanying a solid set of interim results with a bolt-on acquisition of a machine learning specialist involved in the detection of criminal behaviour and protection of assets.
The £9 million addition of Woking-based Cubica will accelerate growth of Chemring's Roke division, which provides services to government and high-value engineering companies.
Shares rose 4% or 13p to 319.5p but analysts at Peel Hunt think they are worth closer to 350p. The broker said: “The outlook is robust, and the business is clearly on the front foot.”
The recruitment sector was also doing well after STEM specialist SThree (LSE:STEM) reported that profits for the year to November are running materially ahead of City expectations. SThree shares jumped 7% to 453p in the FTSE All-Share, while the read-across for Hays (LSE:HAS) and Robert Walters (LSE:RWA) ensured their shares improved 1% and 3% respectively.
SThree reported continued high levels of demand in life sciences and technology, as well strong performances from US, German and Dutch businesses. Its profit upgrade came with a note of caution over the potential threat of Covid-19 variants and the impact of annual leave backlogs for both contractors and the company's own employees.
Analysts at Liberum raised their target price by 70p to 570p, while Jefferies is at 480p.
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