Why has Rolls-Royce stock suddenly jumped today after days and weeks of continuous losses?

[John Aaby]

Why has Rolls-Royce stock suddenly jumped today after days and weeks of continuous losses?

[Brundle Mark]

Hi John,

Thanks for asking this question.

Rolls-Royce stock moved higher today on the announcement that the engine-producer plans to cut 9,000 jobs and therefore save around 1.3 billion pounds. This is a result of the COVID-19 outbreak that continues to paralyze the airline industry.

"This is not a crisis of our making. But it is the crisis that we face and must deal with. It’s fair to say that of our civil aerospace business approximately two-thirds of the total employees are in the UK at the moment and that’s probably a good first proxy.” Rolls-Royce’s boss Warren East said.

This number accounts for more than 17% of the total workforce.

Rolls-Royce stock is one of the worst-performing stocks in the past two years. It had been trading in a bearish environment constantly since the mid-2018. The stock had already lost 35% of its value before the coronavirus outbreak triggered a huge market selloff. In addition, the stock plunged further 60% to trade to hit the 15-year lows earlier this month.

I’d be staying away from the stock until there are clear signs that the airline industry is stabilizing.