Travel Stocks Sell Off After Nice, Muted Gold Reaction
Frankfurt (July 17) European markets opened lower on Friday, led lower by travel and leisure stocks in the wake of the horrific attack last night during Bastille celebrations in Nice, France.
Moderate losses on the FTSE 100 were dominated by travel firms like Easyjet (LON:EZJ) and TUI (LON:TUIT). Gold miners Fresnillo (LON:FRES) and Randgold (LON:RRS) were top fallers after a muted reaction in the price of gold to the atrocity in Nice. Homebuilder and bank shares have bounced back after shock decision to hold rates from the Bank of England.
The market’s kneejerk reaction to sell travel and leisure stocks in the wake of a terrorist event is unfortunately becoming something all-too-familiar. Recent experience suggests the initial sell-off will be short-lived but the potential damage to traveler confidence is a clear negative for affected firms. This is especially true in France where there is already concern that the drop in sterling will impact tourism from the UK.
A cautious outlook from Firstgroup (LON:FGP) added to woes for the travel sector. The transport operator suggested the benefits of the lower pound from dollar-based business will be offset by domestic uncertainty after the referendum.
The British pound is higher again after yesterday’s gains, setting it up for its best week since 2009. The Bank of England on hold, even with hints of action at its next meeting in August could deter more speculative shorts for the time being.
US stocks look set for a lower open, with the Dow Jones Industrial Average set to pull back from a record high ahead of the release of earnings from Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) as well as a barrage of US economic data including retail sales, inflation, industrial production and consumer confidence.