Travel-related shares led the way on Tuesday as investors took cues from data and scientists that the spread of the Omicron variant of Covid-19 may not affect the global economy as much as previously feared.
Although registered infections have surged to new record highs in the UK, the Eurozone and the US, this morning there were pronouncements from leading scientists that the worst of the Covid-19 pandemic is behind us and that the spread of omicron in London may have “plateaued”.
Oxford University professor Andrew Pollard, chief investigator of the Oxford Covid-19 vaccine trials with AstraZeneca PLC (LSE:AZN), told the Telegraph, "The worst is absolutely behind us. We just need to get through the winter.
Elsewhere, epidemiologist Neil Ferguson told BBC Radio 4 this morning, “I am cautiously optimistic that infection rates in London in that key 18-50 age group, which has been driving the Omicron epidemic, may possibly have plateaued.
“It’s too early to say whether they’re going down yet.”
The professor from the School of Public Health at Imperial College London said there may see “a different pattern in hospitalisations”, which are generally going up across the country. “We may see high levels for some weeks,” he said.
Optimism was clear in financial markets, with the FTSE 100 rising 90 points to its highest level since mid-February 2020.
Travel-related stocks were the fore as traders bet that international travel will face fewer restrictions.
British Airways owner International Consolidated Airlines Group (LSE:IAG) was top of the blue-chip leaderboard, up 11% at 157.72p, while Wizz Air Holdings PLC (AIM:WIZZ) was leading the mid-caps, also up 11% to 4,674p after it also revealed passenger numbers for December.
Budget carrier easyJet plc (LSE:EZJ) was up 10% and engine maker Rolls-Royce Holdings PLC (LSE:RR.), which was also boosted by completing the sale of its Norway-based Bergen Engines business, was up 3.5% at 127.18p.
Tour operator TUI AG (LSE:TUI) rose almost 10% and cruise liner Carnival PLC (LSE:CCL) climbed over 7%.
Meanwhile, hoteliers Whitbread PLC (LSE:WTB) and Intercontinental Hotels Group PLC (LSE:IHG) also got some love, with the former up 3% and the latter 2% better.
While the evidence is getting stronger that Omicron causes milder symptoms on average than earlier variants of the SARS-CoV-2 virus, economist Holger Schmieding at Berenberg, said the record highs for coronavirus infections in the UK, the Eurozone and the US "could still overwhelm some health systems for a while.
"Omicron may still cause significant if temporary economic damage on top of potentially serious strains on medical systems," Schmieding said.
He said the UK and Denmark, the two European countries hit first by the variant, may be the real test cases, with early evidence proving "mildly encouraging", with hospitalisations rising noticeably but far below the peaks of last January.
Analysts at AJ Bell said the stock market gains, which also included oil firms, pub and restaurant operators, “reflect diminished investor concern about the Omicron variant of Covid-19 amid hopes it is milder, if more transmissible, and therefore may have a limited impact on the economy and won’t require onerous or long-lasting restrictions.
“This is not a certainty, and there is the possibility the market might change its mind on Omicron again if there are signs the sheer volume of cases threatens to overwhelm countries’ health systems.
“If Omicron does prove a short-lived issue, attention may return to inflationary pressures, with minutes from the Federal Reserve’s pre-Christmas meeting tomorrow, and US non-farm payrolls data on Friday, helping to give an insight into the situation in the world’s largest economy," they added.