European travel stocks drop on US warning of 'increased terrorist threats'
It was the first time a Nato member’s armed forces had shot down a Russian or Soviet military aircraft since the 1950s. Russia said its plane had been downed over Syria, but after an initial early-morning flurry on the breaking news, the effects on European bonds and currencies were muted overall.
The yield or interest rate on the Irish 10-year bond traded at 1.10%, little changed on the day, while the equivalent German 10-year bund was also unnerved, closing 4 basis points lower at 0.50%.
Ryan McGrath, senior bond trader at Cantor Fitzgerald Ireland, said the effects on markets from the Paris killings and the shooting down of the Russian fighter have so far been muted.
Travel stocks affected as global tensions rise & geopolitical concerns escalate #Paris #FTSE https://t.co/3aUY0KyYyw pic.twitter.com/ObXnyRKkeV
— Worldpay (@Worldpay_Global) November 24, 2015
“We did see a spike on the headline [of the downing of the fighter] at 20 to nine, but there was little follow through,” Mr McGrath said.
An analyst at Investec Ireland said that the effects on markets were relatively mild. “Commercial airline stocks were the most affected,” he said.
Travel and leisure stocks were under pressure after the US State Department warned US citizens of the risk of worldwide travel posed by what it called increased terrorist threats.
“Investors should stay cautious in the near-term as the threat of terror attacks are spreading to other parts of the world.
"The US travel alert further highlights investors’ caution.
"These concerns could have a further negative impact on fresh travel bookings,” said Koen De Leus, senior economist at KBC, in Brussels.
At one stage yesterday, budget airline EasyJet lost 2.9%, IAG, the owner of Aer Lingus, Iberia and British Airways, fell 3.3%, and tour operator TUI dropped 2.5%.
The dollar fell against the traditionally safe-haven Japanese yen and Swiss franc, helping push oil and metals prices higher.
Yields on 10-year US Treasuries hit a three-week low at one stage of 2.21%, while two-year German yields dipped below -0.4% for the first time.
Turkish shares fell 1.4% and the Turkish lira lost 1% against the dollar. Russian stocks and the rouble also fell.
FTSE falls as travel stocks continue slide: https://t.co/pdmEsFbc2h pic.twitter.com/1ycMhNkLTL
— Reuters UK (@ReutersUK) November 24, 2015
Brent crude rose 53 cents to $45.36 a barrel. Gold rose 0.3% to $1,074.75 an ounce but near a 6 1/2-year low hit last week.
However, there was better news elsewhere. Bank of America Merrill Lynch projected that US shares will increase next year.
Savita Subramanian, head of US equity strategy, is forecasting the S&P 500 will reach 2,200 in 2016. She also included a target of 3,500 by the year 2025. As of now, the index is hovering a little below 2,100.
For next year, Ms Subramanian says to “stick with the S&P 500”, despite valuations having less room to run.
“We expect modest gains for US large cap stocks in 2016: The likelihood of a recession in the next 12 months is low in our view,” she said.
Furthermore, neither valuations nor the economic data look particularly worrisome compared to previous peaks in the market, according to BofAML.
Going beyond the next 12 months, however, things really look good. Ms Subramanian and her team point to a nearly 70% rise by 2025.
CONNECT WITH US TODAY
Be the first to know the latest news and updates
