What happened
Growth stocks including Airbnb (ABNB 1.43%) charged higher Monday after a fiscal policy about-face in the U.K. jolted global markets. In addition, Bank of America delivered a solid earnings report, the latest data point to show that the U.S. economy remains stable despite rising interest rates and high inflation.
There was no company-specific news relating to Airbnb, but the travel stock benefited from the broad tailwinds in the market, especially the weakening dollar.
Airbnb stock closed the session up 6.7%, while the Nasdaq Composite index tacked on 3.4% for the day.
NASDAQ: ABNB
Key Data Points
So what
Economic tensions in the U.K. cooled off after the Bank of England said it would resume selling bonds several days after it ended the emergency bond-buying program it had initiated two weeks prior in a move to help shore up confidence in long-dated U.K. bonds. Also on Monday, newly installed U.K. Finance Minister Jeremy Hunt jettisoned nearly every part of the fiscal plan proposed by his predecessor, Kwasi Kwarteng; the tax cuts and spending increases in that package had panicked the British markets and were expected to lead to higher inflation. Hunt also set an April date for the end of energy subsidies, but said the government would look for ways to help those in need beyond that date.
As a result of those moves, the British pound gained and the U.S. Dollar Index fell in value by 1.1%.
That decline will benefit global companies like Airbnb that report in dollars. In 2021, 50% of the company's revenue came from outside the U.S., and that share has been even higher historically. A stronger dollar makes international bookings less valuable, lowering the business's overall revenue and profits. A weaker dollar does the opposite.
Now what
Monday's news also seemed to suggest that the prospects for a global recession are slightly lower than was previously believed, which would also be good news for Airbnb. Its business has boomed amid the travel recovery that has followed the pandemic's shutdowns and social distancing precautions, but travel spending is sensitive to macroeconomic conditions, and a recession would cool off the travel boom.
If the U.S. and Airbnb's other key markets can avoid falling into recessions and the dollar continues to weaken from its current unusually high level, Airbnb stock could surge from here.
