European shares turn lower as travel, oil stocks weigh

May 11, 2020

Frankfurt (May 11)  European stocks gave up early gains on Monday, with travel and oil stocks taking a hit even as several countries emerged from coronavirus-driven lockdowns.

The pan-European STOXX 600 shed 0.25%, easing from a near 1% gain at the open. Europe’s travel and leisure .SXTP as well as oil and gas .SXEP sectors fell about 1% each.

Britain's FTSE 100 .FTSE also pared early gains to trade flat and midcap shares edged .FTMC 0.4% higher after Prime Minister Boris Johnson said on Sunday the lockdown would not end yet but encouraged some people to return to work.

France is also set to cautiously lift coronavirus-induced restrictions, although Germany saw a spike in cases just days after its leaders eased the country’s lockdown.

“Investors are basing their hopes on reopenings progressing slowly and central banks and governments continuing to provide stimulus,” said Ian Williams, economics and strategy research analyst at Peel Hunt.

“But there is definitely a disconnect between the fundamentals and the way the markets are performing.”

Shares in Britain’s low-cost carrier easyJet (EZJ.L) fell 7% and British Airways-owner IAG (ICAG.L) dropped 2.2% as the UK government said it would introduce a 14-day quarantine period for most people arriving from abroad.

French stocks .FCHI took a hit as Airbus SE (AIR.PA) dropped 3.6% after Australia's Qantas Airways (QAN.AX) said it did not expect to take delivery of any new planes in the near term as it grapples with a plunge in demand due to the coronavirus pandemic.

Aircraft engines maker Safran (SAF.PA) dropped 4%.

Despite a feeble start to the month, European shares have recovered more than 27% since mid-March lows as investors pinned their hopes on a swift economic recovery after countries started to ease lockdowns and policymakers’ support to ailing economies.

That helped markets look past a staggering 20.5 million U.S. job losses in April, while Germany’s Ifo institute said that many industries are cutting jobs, noting that 39% of automotive companies, 50% of hotels, 58% of restaurants and 43% of travel agencies had shed staff in April.

Among gainers, French carmaker Renault (RENA.PA) rose 3.8% after finance minister Bruno Le Maire said that he regretted a decision by the CGT trade union to prevent a reopening of a Renault plant at Sandouville. The government is set to hold new meetings this week with members of the automotive industry.

German payments company Wirecard (WDIG.DE) jumped 8% after announcing a reshuffle of its management board amid allegations including accounting irregularities and disclosure violations, which it denied.

Italian shares .FTMIB gained 0.5% in relief that Moody's spared the country of a rating downgrade on Friday, but DBRS Morningstar cut Italy's trend to "negative" from "stable", citing uncertainty over the economic repercussions stemming from the outbreak.


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