EUROPEAN SHARES recovered to end higher yesterday after being under pressure for most of the day on fears of a swine flu pandemic, with drugmakers up on hopes of more vaccine demand and other defensives also rising.
The FTSEurofirst 300 index of top European shares closed up 0.4 per cent at 813.69 points after falling to 795.54 earlier in the session. In Ireland, the Iseq index closed at 2,429.03, a gain of 0.33 per cent.
GlaxoSmithKline rose 5.7 per cent, AstraZeneca was up 3.7 per cent, Sanofi-Aventis gained 2.4 per cent and Roche rose 3.5 per cent.
“It’s very easy to identify specific sectors that could be vulnerable to the problem, like the travel sector, the airlines, the hotel sector, but overall sentiment is still reasonably positive after gains that we have seen over the past few weeks,” said Henk Potts, equity strategist at Barclays Stockbrokers.
“The slight improvement that we are seeing, in terms of economic data along with a more positive reporting season, is outweighing the potential risk of a swine flu developing and becoming more serious,” he said.
A World Health Organisation emergency committee could raise its pandemic alert level to phase four or five as a deadly swine flu outbreak shows no signs of slowing, a spokesman for the agency said.
The virus has killed more than 100 people in Mexico and spread to North America and Europe.
The pandemic alert hit travel and leisure stocks. Lufthansa fell 9 per cent, British Airways was down 7.3 per cent, Air France-KLM slipped 6.3 per cent and Tui Travel fell 3.3 per cent.
Cruise operator Carnival, owner of Cunard, was down 6.8 per cent, French hotel major Accor lost 3.7 per cent, while travel group Thomas Cook was down 4.4 per cent.
Both the quoted Irish airlines fell sharply but traders noted their performance was better than their European peers. Aer Lingus lost 5.21 per cent to close just below €0.70, while Ryanair was down 4.35 per cent to €3.30.
“The effect on the market is likely to be temporary, though obviously nobody knows what is going to happen,” said Arthur Van Slooten, a strategist at Société Générale, in Paris.
“There has been some wild speculation. But this can create a nice entry point, and we would buy into weakness.”
Later in the day, US stocks retreated as concern the swine flu outbreak will hurt travel, energy and hotel companies overshadowed gains in healthcare shares and General Motors plan to cut liabilities. Oil fell for the first time in a week, while treasuries, the dollar and yen advanced.
Host Hotels Resorts, the largest US lodging real estate investment trust, slid 20 per cent. Delta Air Lines and Carnival lost at least 14 per cent, while Chevron fell 1.8 per cent as crude tumbled on concern the illness will curtail travel. Humana, the second-biggest provider of US-backed medical benefits, rose 7 per cent as earnings more than doubled. GM rallied 19 per cent.
“Concerns about how broad-based the outbreak is have grown over the course of the day,” said Douglas Cliggott, manager of the $84 million Dover Long/Short Sector Fund, which has beaten 94 per cent of its peers over the last year.
“The hope that a lot of travel-related industries had seen the worst has taken a severe hit today.” – (Reuters, Bloomberg)
