The FTSE 100 rallied early on Tuesday, building on a strong session on Monday, only to give the gains back and slip into the red by the afternoon.
Early top risers in the FTSE 100 were airlines IAG and easyJet who were up 9% and 5% respectively in early morning trade, but fell back as the session progressed.
Th optimism was around a possible scheme called ‘air bridges’ that would allow travellers to fly to certain destinations that hadn’t had large outbreaks of coronavirus.
“It is the case we should consider further improvements – for example, things like air bridges enabling people from other countries who have themselves achieved lower levels of coronavirus infection to come to the country,” said Grant Schnapps as he outlined plans in the commons.
However, the initial optimism led by the airlines soon fizzled out as a raft of economic data once again confirmed the dire situation in European economies.
New car sales fell 76% in Europe in April as the coronavirus lockdown curtailed new purchases. The auto sector is a major constituent of the European economy and the German Dax and French CAC 40 was soon followed by the FTSE 100 into the red.
The European construction sector was also hit with activity falling 15% from a year ago.
“The market is trying to weigh up optimism around a vaccine with the fact that earnings expectations already bake in a pretty strong rebound in the second half of this year,” said Mike Bell, global markets strategist at JP Morgan.
The market also digested the latest instalment of UK jobs data which pointed to a significant jump in unemployment claims, despite a broad furlough scheme in the UK.
“It has taken a while to filter through, but now the UK is starting to see the same kind of horrific jobs data as the US. After ducking the expected ballooning of unemployment claims in March, April reflected the fact that the pain was merely delayed by a month,” said Connor Campbell, analyst at Spreadex.
“The claimant count change for last month rose by 856,500 – to put that in perspective, March’s increase was 5.4k, while analysts were forecasting an increase of 675,000.”
The FTSE 100 was trading at 6,020, down 0.4%, just after 12pm in London.