Easyjet lifts FTSE as Brits shun staycations

So much for staycations in Cornwall or the Lake District: airline stocks leapt higher on Wednesday as Easyjet put paid to concerns that Brits would avoid the budget airline and enjoy a holiday at home.

The FTSE 100-listed carrier announced a strong three months of sales - up 10.5% to £1.14 billion in the quarter to the end of June - while reporting that 73% of plane seats for flights in the second half of the year had been booked.

Easyjet (EZJ.L) shares rose to the top of the FTSE 100, up 5% to £14.05, after the forecast-busting numbers. British Airways owner IAG (ICAG.L) followed with a gain of 2.4% to 292p, while Ryanair was trading up 3.7% to €7.29.

The gains come after losses yesterday when HSBC analyst Andrew Loddenberg warned 'demand for holiday flights will be melting as fast the icecreams on Clacton beach in the current heat wave'.

Instead, the results imply 'market concerns over late bookings may be overplayed,' said analysts at Jefferies, who nonetheless prefer shares in Ryanair for its 'sector-leading margins and strong growth'.

Robin Byde of Cantor Fitzgerald noted: 'Easyjet sold off yesterday on concerns about summer bookings; this appears unfounded, but the issue remains whether most of this good news is already built-in given the strong performance of the stock.'

China stimulus hopes lift FTSE

Airlines led broader market gains on Wednesday, even amid more signs of a slowdown in the crucial Chinese economy. Britain's FTSE 100 rose 0.6% to 6,640, in line with gains on other major European markets.

HSBC's preliminary reading of manufacturing strength (the flash PMI index) fell to 47.7 in July from 48.2 in June. Though the survey reading provides more evidence that the world's second largest economy is slowing, it was taken by economists as another sign that China's authorities may have to step in and take action to boost growth.

On the contrary, a strong German PMI reading seemed to be taken on its merits. At 52.8 in July, up from 50.4 in June, the number from data company Markitindicated the strongest increase in overall business activity for five months.

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