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Travel stocks lose out in FTSE 100 reshuffle

Budget airline easyJet and cruise operator Carnival are two of the stocks set to be demoted from the FTSE 100 index, after their share prices were hit hard by the coronavirus pandemic.

The results of the quarterly review of the UK’s index of 100 largest companies was announced on Wednesday (3 Jun) after the market close, with energy supplier Centrica and engineering firm Meggitt joining easyJet and Carnival in being moved down to the FTSE 250 index.

It was broadly expected that travel and tourism companies would bear the brunt of any changes due to the global lockdown measures.

easyJet had only returned to the FTSE 100 index in December 2019, however, the travel lockdown caused by the coronavirus pandemic saw the airline ground its fleet, with the share price losing almost two-thirds of its value during the peak. At the end of May it announced plans to shrink its fleet and cut up to 30% of its workforce to cut costs and restructure its business. Carnival has experienced similar pressure in recent months, with cruises in general having been depicted as a source for a number of outbreaks.

More recently travel and tourism stocks had moved higher as countries began easing lockdown restrictions and setting tentative dates for tourists to return, but the recent rally appeared to be too late for easyJet and Carnival to keep their FTSE 100 positions.

Meanwhile, stocks being promoted to the large-cap index included cybersecurity firm Avast, gambling company GVC, which owns Ladbrokes and Bwin, and Kingfisher, the parent company of B&Q and Screwfix, which appears to have benefited from more people taking on DIY projects in lockdown.

The quarterly reviews of which companies exit or enter the FTSE 100 index, are designed to be impartial, driven by a specific set of rules, to ensure the indices continue to portray an accurate reflection of the market they represent.

The latest changes to the indices will take effect from Monday 22 June.


Zoom sees 169% increase in sales

Video conferencing business Zoom saw its sales revenue jump 169% year-on-year to $328.2m for the three months to 30 April, driven by a rapid  increase in demand as the coronavirus pandemic has resulted in more remote working.

It attributed the growth to a 71% increase in subscriptions during the three months, and revealed it recorded a peak of 300 million daily participants in April, compared with 10 million in December.

However, the rapid growth meant the company has faced increased scrutiny, with founder Eric Yuan acknowledging that it had addressed specific security and privacy issues during the period.

In the results presentation Zoom noted the current environment had expanded its opportunities, and it had raised its sales revenue forecast to between $1.75-1.8bn for the financial year. But it also cautioned that the “impact and extent of the crisis and its associated economic concerns remain largely unknown” and the forecasts could be subject to change.

Quilter Market Explainer

In response to the severe market volatility that has accompanied the outbreak of the global coronavirus pandemic, Quilter has launched the Quilter Market Explainer, a special weekly webcast for advisers and clients.

All our previous broadcasts in this series are available on demand, please click on the play button.

Today’s Explainer aired at midday and featured Stuart Clark from Quilter Investors alongside David Miller and Carly Moorhouse from Quilter Cheviot, discussing how the coronavirus pandemic is affecting emerging markets from an investment perspective and whether opportunities remain in some of the potentially faster-growing economies of the world.

Click here to listen to the recording.

These webcasts now run at midday every Friday throughout the virus lockdown period.