IAG shares fly on Omicron optimism

The IAG share price was the top riser in London’s leading index on Tuesday as fears over the omicron variant diminished and investors picked up the beaten down shares.

“Stocks reliant on international travel are powering ahead, with British Airways owner, International  Consolidated Airlines Group rising 7% in early trade. With yet more indications that Omicron, though highly infectious, does not cause such serious illness, a wave of relief is pushing up companies which have been hit by worries about tighter restrictions,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

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IAG shares were up over 10% at the time of writing in morning trade on Tuesday.

The rally in the IAG share price came a day after US airline shares soared in the first trading session of 2022 in the US.

The rally in US airlines was sparked by a research note by Citigroup analyst Stephen Trent who said the declines due to the Omicron variant could be ‘unreasonable’.

“Nevertheless, higher vaccination rates and emerging anti-viral treatments are just some of the factors that could make negative, knee-jerk stock price reactions to the emergence of future variants look increasingly unreasonable,” Trent wrote in a research note.

IAG shares rose in a broad rally that saw most sectors gain. 79 of the 100 stocks in the FTSE 100 were higher on Tuesday morning with IAG the FTSE’s top riser.

“The best performing stocks in London were in the travel, leisure and energy sectors. Rolls-Royce, also taking off thanks to its heavy footprint in aircraft engines and spares and repairs, announced some corporate housekeeping with the completion of the sale of its Bergen Engines business,” said AJ Bell investment director Russ Mould.

“The gains for oil firms, airlines and hotel, pub and restaurant operators reflect diminished investor concern about the Omicron variant of Covid-19 amid hopes it is milder, if more transmissible, and therefore may have a limited impact on the economy and won’t require onerous or long-lasting restrictions.”

“This is not a certainty, and there is the possibility the market might change its mind on Omicron again if there are signs the sheer volume of cases threatens to overwhelm countries’ health systems.”

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