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European shares fall as Lufthansa warning hits travel stocks

Wednesday, 11 June 2014 - 5:04pm IST | Place: London | Agency: Reuters
European equity markets fell on Wednesday as a profit warning from German airline Lufthansa hit travel stocks.
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European equity markets fell on Wednesday as a profit warning from German airline Lufthansa hit travel stocks.

Lufthansa slumped by 14.7 percent in heavy volume after the company said it would not reach its profit targets for the next two years, and the fall in its share price dragged other airlines down with it.

Air France KLM fell 6.2 percent, International Consolidated Airlines Group dropped by 5 percent and the regional STOXX Europe 600 Travel & Leisure Index fell 1.8 percent - making it the worst-performing equity sector.

Aerospace group Airbus also slid 3.7 percent after Dubai's Emirates airline cancelled a contract with the company.

Lufthansa's woes also weighed on the broader German stock market, with the benchmark DAX index falling by 0.8 percent to 9,947.07 points, retreating from a record high of 10,033.74 points reached earlier in the week.

"It's looking pretty bearish for the whole airline sector," said Berkeley Futures associate director Richard Griffiths.

TEMPORARY SETBACK?

The pan-European FTSEurofirst 300 index, which had hit its highest level since early 2008 this week, fell 0.3 percent to 1,393.65 points, while the euro zone's blue-chip Euro STOXX 50 index fell 0.6 percent to 3,295.01 points.

Griffiths expected European equity markets, which had hit multi-year highs over the last week after the European Central Bank (ECB) unveiled new economic stimulus measures, to edge lower in the coming sessions.

He said the DAX could fall to 9,600 points while the Euro STOXX 50 could retreat to 3,100, but he expected any pullback to be short-lived due to what he described as the ECB's "safety net."

Matthias Thiel, market strategist at German bank MM Warburg, also expected European stock markets to resume their upwards trend soon, and for the DAX to climb back above 10,000 points.

"It is a temporary setback after the recent rally, and the market should soon go up again," he said.




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