Airline stocks lead drop in investor confidence after Madrid atrocities

AIRLINE stocks were the main fallers on European and American markets yesterday as investor confidence continued to suffer following last week’s bombings in Madrid.

News that blame for the atrocities had shifted from separatist group ETA to Islamic extremists sparked fears of further terrorist attacks and prompted general selling in sectors which are seen as more exposed to terrorist threats.

Investors switched from stocks into less risky government bonds. British Airways fell 6% yesterday, while low-cost carrier Easyjet witnessed a 5.3% decline before recovering some lost ground. Ryanair, which fell over 25% last month following a profit warning, escaped the selling and was unchanged at €4.65. Airlines across the Atlantic also suffered from market nerves, as AMR Corp, parent of America’s biggest airline American, fell by more than 7%. Delta, the third-largest carrier, fell 14%.

Most major stock market indices were in negative territory yesterday. The Dow Jones industrial average was 1% lower, while London’s FTSE 100 fell 1.2%. Frankfurt’s Xetra Dax shed 2.7%, while the CAC 40 in Paris was down 2.4%.

Spain’s major index, the IBEX 35, was down over 4%.

Increasing fears that further attacks would not be confined to Spain resulted in increased selling of the dollar, which dipped towards the $1.23 mark against the euro but remained some way off the record lows seen in recent weeks. The Swiss franc, which is traditionally seen as a safe haven among investors, was the main beneficiary of the selling.

Analysts expected the markets to recover in the short-term but that longstanding concerns over American and European economies would continue to have an impact on investor confidence.

“At the moment there is some nervousness about the market,” said Stuart Fraser, investment director at London private client money manager Brewin Dolphin.

“But at the end of the day these types of events have little impact on the economy.

“They have local impact, on the travel industry for example.”