FTSE 100 set to fall further but easyJet share price gives index a lift

Despite a promise to 'build, build, build', British Prime Minister Boris Johnson’s latest speech hasn’t done much to move the FTSE 100.

Speaking at Dudley College of Technology, Johnson pledged to accelerate a pre-pandemic spending plan worth £5 billion. Harking back to the 2008 financial crisis, the prime minister said the UK won’t 'cheese-pare' its way out of trouble. Infrastructure, investment in education and increased expenditure for the NHS are all part of the post-Covid-19 lockdown revival strategy.

Johnson also hinted that social distancing will be nothing more than a short-term solution, saying that normality needs to resume for the sake of the economy. However, despite the upbeat announcement, the FTSE 100 was down at the close of trading on 30 June to 6,186.24. Although the index remains bullish for the quarter, the threat of localised lockdowns has spooked investors.

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FTSE 100 falls but quarter still bullish

Daily trading started at 6,225.77. However, as news of a lockdown in Leicester made the headlines, the blue-chip index took a 0.6% hit. The day’s post-market trading price reflects similar movements at the start of the week as the threat of lockdowns in the US began to impact share prices on both sides of the Atlantic. However, even with the FTSE 100 failing to make any ground today, airline shares continued to offer some hope.

Helping to keep the index buoyant during the recent period of uncertainty is easyJet. As European countries emerging from their Covid-19 lockdowns and borders reopen to Brits, easyJet’s share price has taken off.

As the FTSE 100 closed on 30 June, easyJet shares were trading at 680p per share. That’s just over 30p higher from a low of 649p per share on 29 June. The latest movements are part of a larger price increase that’s seen easyJet shares surge since mid-May. Fuelling the lift-off is the recent demand for Spanish holidays.

Under the UK’s new traffic light scheme, British tourists can visit Spain without having to quarantine for 14 days when returning home. This, coupled with similar outbound conditions, triggered record sales for travel agents on 27 June.

Official confirmation of British travel restrictions to Spain and other European countries is due to be announced on 1 July. However, all indications are that Spain will allow visitors from the UK from 6 July onwards. France, Belgium, Italy, the Netherlands and Turkey are also expected to open up at the start of next week.

Air travel gives FTSE 100 a lift

Prior to Covid-19, easyJet was running, on average, 1660 flights per day, with many of them heading to Spain. The prospect of a summer holiday season has helped the easyJet share price chart reverse a three-month downswing.

For the FTSE 100’s other major airline, International Consolidated Airlines Group (IAG), the daily price charts have been much more of a mixed bag. Although the IAG share price peaked at 233p on 30 June, it ended the day at 222p per share - the intraday drop came as Greece extended its British travel ban. With Covid-19 numbers still not at a satisfactory level, Greek authorities have banned Brits until 15 July at the earliest.

TUI instantly cancelled all holidays to Greece for the coming weeks, as did Ryanair, Dart Group-owned Jet2 and IAG-owned British Airways.

For British Airways, the news came as a blow. While easyJet can rely on its network of short-haul destinations, British Airways has fewer flight paths across Europe. The extended lockdown on Greek holidays means the IAG share price may continue to fall as we move through the week.

However, even with the unexpected U-turn from Greece, the travel industry continues to rebound. For the FTSE 100, that’s significant. If local lockdowns spread across the country, businesses may experience another dip. But, if people can fly and the urge to escape lockdown conditions remains, airline shares should continue to rise and, in turn, keep the FTSE 100 afloat.

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