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MARKET REPORT: Covid is driving markets in a downward spiral

MARKET REPORT: Travel stocks suffer another scorching day as new coronavirus concerns are spiraling stock markets around the world into a tailspin

Travel stocks suffered another scorching day as new concerns about the coronavirus sent stock markets around the world into a tailspin.

British Airways owner IAG was the biggest drop on the FTSE 100 as shares fell 3.4 percent, or 5.35p, to 151.6p amid fears that stricter travel restrictions are on the way to spread of Covid-19.

On the FTSE 250, vacation business Tui fell 16.7 percent, or 70.6p, to 352p, while Easyjet fell 3.3 percent or 26.6p from 780.6p.

With summer holidays looming, the sell-off was repeated on the mainland as German airline Lufthansa fell 2.7 percent and Air France KLM 2.5 percent.

Travelers around the world are faced with strict new rules that require them to take a Covid test before departure and undergo a period of quarantine upon arrival. There is growing speculation that the UK could close its borders altogether.

Hopes of an early end to the lockdown are also fading, despite the introduction of vaccines, raising fears of a double dip and delayed recovery.

The FTSE 100 fell 0.3 percent, or 20.35 points, to 6695.07 points, while the FTSE 250 dropped 1 percent or 196.81 points to 20,596.91. “ The FTSE 100 is falling back to early 2021 levels as any optimism about the Brexit resolution and vaccine rollout is inundated by the seemingly endless Covid-19 crisis, ” said AJ Bell, investment director Russ Mold.

The prime minister’s refusal to outright rule out an extended lockdown, as rumors of a gradual reopening began to swirl from May, has lowered sentiment towards those companies that would benefit the most from more movement.

Trainline fell 5 percent, or 22.2p, to 425.8p, while WH Smith, which has stores at train stations and airports across the country, fell 3.3 percent, or 58p, to 1725p.

Mall owner Hammerson – whose tenants struggle to survive while their stores are closed – fell 6.2 percent, or 1.35p, to 20.35p.

Oil inventories also declined – BP fell 1.1 percent, or 3.35p, to 290p, while Shell fell 1.3% or 17.2p to 1359.6p – fearing new pandemic restrictions in China will increase demand for fuel will curb hit the price of crude oil. Brent fell 1.1% to 55.56.

However, it wasn’t all doom and gloom, and IT provider Kainos lifted its year-long coaching after a decent end to 2020.

“The continued momentum in our business has led to strong trading performance and we therefore expect results for the year ending March 31, 2021 to exceed current market consensus expectations,” the company said.

Kainos said it was engaged in “several substantial long-term commitments as part of the government’s digital transformation program, including supporting the NHS in responding to Covid19”. Shares were up 16.4 percent, or 186p, to 1322p.

IT consultancy Computacenter was also optimistic as it raised its earnings expectations – “over £ 195 million” – for the third time in less than six months.

The company added, “The positive momentum we’ve seen in trading since the start of the pandemic doesn’t seem to be diminishing.”

Shares fell 1 percent, or 24p, to 2430p.

Pharmaceutical giant Glaxosmithkline got a boost when the U.S. Food and Drug Administration (FDA) approved the HIV drug Cabenuva, which cuts treatment doses from one a day to one a month. Shares were up 1.1 percent, or 15.4p, to 1380.2p.

Investors kept a close eye on Diageo ahead of the update next week. According to analysts, the owner of Smirnoff and Guinness will show a sales decline of 4.6 percent.

Shares barely moved, but fell only 0.02 percent, or 0.5 pence, to 2,908.5 pence.

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