Stimulus and vaccine hopes tip the scales in favour of the FTSE, and Jet2-owner Dart’s recovery hits new headwinds

“The markets feel like they are being weighed on a set of scales at the moment with stimulus and vaccine hopes on one side and Covid-19 second wave fears and recession on the other,” says AJ Bell Investment Director Russ Mould.

“After positive signs that politicians in the US might agree a new package to reinvigorate the economy and news of progress towards a prospective coronavirus vaccine the FTSE 100 was tipped in a positive direction – gaining 0.8% and looking to regain the 6,000 mantle.

“Whether the index can shake off the indignity of being valued at less as a whole than Apple alone is still in question.

“The FTSE’s advance was more modest than the move US stocks managed last night, with the UK market perhaps reflecting a more mixed session in Asia.

“The top FTSE riser, despite posting a massive loss, was Melrose as it announced the kind of job cuts many feared when it took over UK industrial fixture GKN in 2018.

“In fairness, the company has been forced to act given the exposure to an aviation sector decimated by the pandemic.

“Elsewhere, oil prices fell sharply, which could be a warning sign for equities as they were weak heading into the big correction in March, though the move also reflected the onset of refinery maintenance season when demand for crude tends to dip. Gold prices also traded lower.”

Dart Group (Jet2)

“The airline sector continues to face setbacks in its efforts to recover from the Covid-19 crisis. Jet2-owner Dart Group’s admission that winter bookings haven’t met expectations just goes to show that it is impossible to accurately gauge demand for travel at present.

“Airlines continue to tweak capacity plans as they deal with ongoing changes to quarantine restrictions for different countries and weigh up demand (or lack or) for different destinations.

“Being flexible with capacity can help airlines to ensure that they haven’t got too many planes flying empty, yet at the same time it is frustrating for passengers who plan a holiday and find their flights get cancelled at the last minute.

“Annoying customers is something airlines cannot afford to do, particularly as so many people are still struggling to get refunds for flights that didn’t happen earlier this year. “Prices are being slashed in the sector so there are bargains to be had in theory but they involve a big gamble on whether the flights will happen.

“Dart is more optimistic about next summer’s booking as it seems people are more confident about flying next summer than any time this year. There will be a mixture of people who have shifted their 2020 summer booking back a year and others who simply feel they deserve a few weeks in the sun in a foreign country after being confined to their home this year in lockdown.

“That suggests it will continue to be a waiting game for airlines, challenging their financial ability to stay afloat until life starts to return to normal.”

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