FTSE 100 futures climb higher as leaders ease Covid-19 lockdown measures

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.

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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 aircraft 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.

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