Airline stocks are gaining on the FTSE 100 (^FTSE), with IAG (IAG.L) and Rolls-Royce (RR.L) among the leaders.

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.

READ MORE: Market pressure eases as US fiscal policy and a Democratic win appear in focus

“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

Pedestrians are seen on a rainy afternoon walking down London Bridge sideway by the City of London. (Credit: Dominika Zarzycka/NurPhoto)
Pedestrians are seen on a rainy afternoon walking down London Bridge sideway by the City of London. (Credit: Dominika Zarzycka/NurPhoto)

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Bayer falls on profit warning

Shares in Bayer AG (BAYN.DE) have fallen as much as 13% in Frankfurt after the agriculture and pharma giant issued a profit warning.

Shares dropped to their lowest level in more than six months on Thursday after the group warned that the coronavirus pandemic would hit profits harder than expected.

“We expect the COVID-19 situation to particularly weigh on our crop science business in the second half of 2020 and then throughout fiscal 2021,” said chief executive Werner Baumann to investors.

He added that he expects Bayer will take a several billion euro write down of assets in its agricultural business, most of which was bought from Monsanto for $63bn (£48.33bn) in 2018.

The news will resume debates over the merits of the takeover of Monsanto as the business struggles to deliver profits and resolve an $11bn settlement over claims that Monsanto’s Roundup weedkiller causes cancer.

Rolls-Royce wants cash for COVID

Struggling engine maker Rolls-Royce (RR.L) has announced plans to raise up to £5bn ($6.5bn) in debt and equity, as it looks to repair its balance sheet from the blow dealt by the COVID-19 pandemic.

Rolls-Royce announced the funding plans in a statement on Thursday, which include a highly discounted share issue.

Rolls-Royce is seeking to raise £2bn by selling new shares to investors in a 10-to-3 rights issue.

The issue, which comes at a 41% discount, is fully underwritten.

Separately, the company plans to raise up to £3bn in debt. Rolls-Royce is planning to issue a new £1bn bond, has negotiated a new £1bn

LONDON (Reuters) – Britain’s Rolls-Royce

said it planned to raise 2 billion pounds ($2.6 billion) from shareholders, 1 billion pounds from the bond market and secure further loans to rebuild its balance sheet after COVID-19.

The pandemic has battered Rolls’s finances as airlines pay the company according to how many hours its engines fly in wide-body jets. Worries that a recovery in travel will take years have pushed its share price down by 80% this year.

Rolls said on Thursday that the 10 for 3 heavily discounted rights issue was fully underwritten at 32 pence per share, a 41% discount to the closing price of 130 pence per share on Wednesday.

In May, the company said it would cut 9,000 jobs as a result of the pandemic and its finances have been the subject of media speculation since.

“The capital raise announced today improves our resilience to navigate the current uncertain operating environment,” said Chief Executive Warren East in a statement.

Rolls, a key supplier to the government on military programmes, said that the UK government through UK Export Finance has also indicated it was ready to support an extension of its 80% guarantee of Rolls’ existing 2 billion pound five-year term loan.

It would support a loan amount increase of up to 1 billion pounds.

That is on top of commitments for a new two-year loan facility of 1 billion pounds, the company said.

(Reporting by Sarah Young; editing by Kate Holton)

Copyright 2020 Thomson Reuters.

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