IAG shares were up as much as 11% on Thursday and Rolls-Royce had even more dramatic gains, up 22% at around 4:15pm in London.
“RR [Rolls-Royce] is set to post record gains for this week as investors are buying the stock as it is way too cheap, said Naeem Aslam, chief market analyst at AvaTrade. “As for the IAG, speculations are that there could be another support package for airlines as well just like the US.”
Markets have been buoyed in Asia and Europe as investor confidence grew overnight following renewed hopes for a US stimulus deal. US president Donald Trump said on Wednesday that he will resume talks after the election and further positive news came from House speaker Nancy Pelosi. She signalled that she was open to some form of partial measures, particularly for the airline industry.
“It’s partly just a short-term rebound as they’ve been so beaten down, but I think hints about a rescue package for US airlines have lifted the sector here, and also Rolls has been given a boost thanks to talk about British-made small nuclear reactors,” said Chris Beauchamp, chief market analyst at IG. “Also I think we are seeing a pile-in to beaten down sectors as risk appetite recovers, short-term money looking for a quick rebound.”
The UK government could spend up to £2bn ($2.63bn) on a project to design and build mini-nuclear power stations as the industry suffers from major setbacks that could leave a hole in the national electricity supply.
The project to build 16 sites by 2050 could help the beleaguered Rolls-Royce business, which is leading the nine-member consortium to design the “rapid assembly” power stations.
Analysts are optimistic for the sector’s long-term prospects as well.
The hope of a Brexit deal has a big effect on price for airline stocks, such as IAG, said Adam Vettese, market analyst at eToro. “In terms of the industry as a whole, hopes for a coronavirus vaccine has played a big part in the airline narrative so far this year and will continue into 202.”