By Barbara Kollmeyer
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 /zigman2/quotes/210599654/delayed XX:SXXP -0.78% 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 /zigman2/quotes/210597999/delayed DX:DAX -0.97% and French CAC 40 /zigman2/quotes/210597958/delayed FR:PX1 -0.82% fell 0.1% each, while the FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -0.31% dropped 0.3%.
U.S. stock futures /zigman2/quotes/209948968/delayed ES00 +1.99% /zigman2/quotes/210407078/delayed YM00 +0.12% were flat, though Nasdaq-100 futures /zigman2/quotes/210219788/delayed NQ00 +1.59% pointed to a rebound for technology stocks. Wall Street stocks slid on Thursday , with the Dow /zigman2/quotes/210598065/realtime DJIA +1.85% 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 /zigman2/quotes/208070069/delayed UK:IAG -5.69% down 7%, those of easyJet PLC /zigman2/quotes/202825892/delayed UK:EZJ -4.85% down nearly 6% and InterContinental Hotels Group PLC /zigman2/quotes/202865596/delayed UK:IHG -3.68% falling around 4%. Shares of German airport operator Fraport /zigman2/quotes/206448263/delayed XE:FRA -3.78% slid over 5%.
Spain was also the site of major merger news on Friday. The boards of CaixaBank SA /zigman2/quotes/203420110/delayed ES:CABK -0.80% and Bankia SA /zigman2/quotes/205465641/delayed ES:BKIA -0.85% 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 /zigman2/quotes/205677933/delayed ES:SAN +1.29% and BBVA SA /zigman2/quotes/209653399/delayed ES:BBVA +0.64% down 2% or more each, and an over 2% drop for Inditex /zigman2/quotes/203681809/delayed ES:ITX +0.47% , which owns retail chains such as Zara and Bershka.
Elsewhere, shares of Covestro AG /zigman2/quotes/206170750/delayed XE:1COV +0.26% 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 /zigman2/quotes/208368645/delayed FR:ENX -0.48% 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%.