FTSE 100 futures climb higher as leaders ease Covid-19 lockdown measures
FTSE 100 futures are trading higher on Tuesday, with global equities rising as world leaders look to ease coronavirus lockdown restrictions.
FTSE 100 futures are trading 1.5% higher on the back of rising European and US equities after world leaders look to ease coronavirus lockdown restrictions.
Hopes of easing lockdown measures, helped lift both the Dow Jones and the S&P 500 1.5% in early morning trading on Tuesday, with both benchmarks expected to close in positive territory.
Oil prices also rebounded, with Brent crude up 12% to $30.65 per barrel and the US West Texas Intermediate (WTI) climbing 15% to $26.37 a barrel.
The FTSE 100 closed 1.6% higher on Tuesday to 5849.42 points, while the more domestically-focused FTSE 250 rose marginally at 16,093.14.
Oil markets face long-term damage due to aviation crisis
The rise in oil prices helped lift global equities, but the commodity’s surge is likely to be short-lived, with Covid-19 leaving aircrafts grounded around the globe and pushing the airline industry into unchartered territory.
The airline industry is one of the major sources of oil demand, but with world leaders instigating travel bans in a bid to halt the spread of the Covid-19 pandemic, the price of the black stuff has hit record lows in recent weeks.
Despite the easing of lockdown restrictions, travel bans will likely remain in place for some time, leaving the airline industry in a precarious position and prompting Warren Buffett’s Berkshire Hathaway to sell all of holdings in airline stocks.
‘I don't know whether two or three years from now that as many people will fly as many passenger miles as they did last year,’ Buffett said during a virtual shareholders' meeting.
‘They may and they may not, but the future is much less clear to me about how the business will turn out through absolutely no fault of the airlines themselves,’ he added.
Covid-19 weighs heavily on IAG and easyJet share prices
The coronavirus pandemic has brought the global economy to a grinding halt, with members of the airline industry bearing the brunt of crisis.
Since the start of the year, International Consolidated Airlines Group (IAG) and easyJet have seen their share prices fall more than 62%, with analysts constantly downgrading their forward-looking assessments for both airlines.
Goldman Sachs downgraded its rating for IAG from ‘buy’ to ‘neutral’ in May and lowered its target price for the stock to 250p, implying potential upside of 28%.
IAG closed at 195p per share on Tuesday.
Analysts took an even dimmer view of easyJet’s prospects for 2020, with Morgan Stanley, Goodbody and Mainfirst all downgrading the stock in April.
Morgan Stanley remains the most optimistic about easyJet’s share price trajectory, with the US-based investment bank settling with a target price of 800p for the stock.
However, analysts from Mainfirst were particularly downbeat about the low-cost airline, lowing its price target to 450p, implying the stock has a potential downside of -16%.
easyJet is trading at 537p per share at the time of publication.
How much does it cost to buy UK shares with IG?
There are three ways to ‘buy’ UK shares with IG: spread betting, trading CFDs or buying physical shares. The cost will depend on which method you choose. The table below illustrates how the costs to get exposure to £10,000 of Lloyds stock, which is equivalent to 16,000 shares (quoted at 62.5p a share).
Remember, spread bets and CFDs are derivatives, which come with higher risk and reward than investing.
Cost to get exposure to Lloyds stock
|Spread betting||CFD trading||Share dealing|
|Action||Buy £160 per point||Buy 16,000 share CFDs||Buy 16,000 shares|
|Capital required to open||£2000||£2000||£10,000|
Note: Amounts do not include overnight funding charges and taxes. Spread bets are not subject to tax. CFDs are free from stamp duty, but subject to capital gains tax. Share dealing is subject to both stamp duty and capital gains tax.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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