European travel stocks slump amid rising concerns over second wave of coronavirus as M&A chatter lifts Covestro

A couple eat in a street in downtown Madrid, which has seen sharply rising COVID-19 infections, on September 16, 2020.

gabriel bouys/Agence France-Presse/Getty Images

European stocks slipped on Friday with investor concern growing over a worsening second wave of coronavirus cases in the region denting the travel sector. Meanwhile, deal news was moving shares of Covestro, Euronext and CaixaBank.

The Stoxx Europe 600

was flat on the heels of a 0.5% drop on Thursday that snapped a four-day winning streak. The week is headed for a gain of around 1%, as of Thursday. The German DAX

and French CAC 40

fell 0.1% each, while the FTSE 100 index

dropped 0.3%.

U.S. stock futures


were flat, though Nasdaq-100 futures

pointed to a rebound for technology stocks. Wall Street stocks slid on Thursday, with the Dow

snapping a four-day winning streak, though indexes closed off the day’s worst levels. A downbeat outlook from the Federal Reserve and lackluster data were factors.

“While market sentiment remains fragile, we believe that the fundamentals behind the rally are still in place and we are not expecting the recent sell-off in the U.S. as a start of a bear market. In our Cross-asset portfolio, we are keeping our long bias on European stocks,” said Benedict Lowe, cross asset strategist at BNP Paribas, London branch, in a note to clients.

Pandemic worries were rising in Europe. Dr. Hans Kluge, regional director of The World Health Organization in Europe, on Thursday warned of an alarming rise in coronavirus cases in the region. Urging quarantines, he said weekly cases “have exceeded those reported when the pandemic first peaked in Europe in March,” in a virtual news conference.

“We do have a very serious situation unfolding before us,” said Kluge.

One of the worst-affected countries in the first wave, Spain, is in the grips of a second wave, with its Madrid region and home of the country’s capital city, hard hit by rising cases. The government is expected to announce new restrictions on Friday to try and curb the outbreak. And more than 10 million people across northeast England are under lockdowns due to rising infection rates.

Travel and tourism-related stocks fell across the region, with shares of International Conslidated Airlines Group

down 7%, those of easyJet PLC

down nearly 6% and InterContinental Hotels Group PLC

falling around 4%. Shares of German airport operator Fraport

slid over 5%.

Spain was also the site of major merger news on Friday. The boards of CaixaBank SA

and Bankia SA

approved a merger that will create Spain’s biggest domestic lender, with assets of more than 650 billion euros ($770.22 billion). Shares of CaixaBank rose 0.5% and those of Bankia fell 1.8%.

Under the terms of the agreement, Caixa will absorb Bankia, whose shareholders will get 0.68 shares in Caixa for each share they own. That represents a premium of 20% based on Bankia’s share price on Sept. 3, but some analysts had been speculating over a premum of 40%.

The Spain IBEX 35 index dropped 1%, with shares of heavily weighed Banco Santander


down 2% or more each, and an over 2% drop for Inditex
which owns retail chains such as Zara and Bershka.

Elsewhere, shares of Covestro AG

climbed over 6% after Bloomberg News reported that buyout firm Apollo Global Management is mulling a takeover of the plastics maker, citing sources. Covestro declined to comment and a source at Apollo couldn’t immediately be reached, the report said.

And shares of Euronext NV

climbed 3.9% after the London Stock Exchange Group PLC

said that it has entered talks with the exchange group for the sale of Italy’s Borsa Italiana. LSE shares rose 0.5%.

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