(Bloomberg) — Travel and leisure stocks are the only group in Europe in the red this year, but today’s gains may suggest risks from the omicron variant have now been priced in.
The Stoxx 600 Travel & Leisure index rose as much as 2.4% on Thursday, joining a broad-based market rally after the Federal Reserve’s pivot to a tighter stance. The subsector advanced even as coronavirus worries intensified, with France imposing tougher rules on travel from the U.K., and Italy and Greece tightening testing requirements. The British government, meanwhile, urged people to socialize less.
Today’s move may suggest that the impact of omicron on travel shares is beginning to be baked in after an almost 7% drop since the new variant gripped markets at the end of November. The subgroup remains down about 4% for the year, missing out a rally that pushed the benchmark Stoxx 600 index to records.
Among individual stocks, British Airways-owner IAG SA, hotel group Accor SA and package holiday company TUI AG are all showing double-digit percentage declines in 2021, while average year-to-date gains for Stoxx 600 members stands at 19%.
Still, as omicron gets factored in and countries adjust to the latest flareup, the backdrop may improve for travel stocks. Nannette Hechler-Fayd’Herbe, chief investment officer of international wealth management at Credit Suisse told Bloomberg Television that it’s too early to judge omicron’s impact on economic growth, while suggesting a sharp rebound may follow.
“The swing back in the quarters that follow tends to be quite strong,” she said.
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