U.K. Travel and Leisure Stocks Plunge on Fresh Virus Curbs

U.K. travel and leisure shares tumbled on Monday after several European countries closed their borders with Britain due to the spread of a mutated version of the coronavirus, and the government announced new social restrictions. Stay-at-home stocks, meanwhile, got a boost.

Airlines that were expecting a lift around the festive period were among the worst hit, with British Airways parent International Consolidated Airlines Group S.A. falling 20% and Easyjet Plc 17%, their biggest drops since the pandemic initially roiled markets back in March. Ryanair Holdings Plc, which has already said free flight changes or refunds will be offered to customers where European Union governments have banned travel, slid 7.6%. Domestic rail and bus operators also fell as millions of Britons cancel Christmas travel plans: FirstGroup Plc dropped 9.2% and Go-Ahead Group Plc lost 12%.

The moves weighed on the Europe’s Stoxx 600 Travel & Leisure index, which dropped as much as 5.5% in its worst intraday decline for about three months, leaving the gauge on track for its biggest yearly loss since the financial crisis of 2008, down about 22%. Traders are concerned that the tougher strain of the virus might have already been transmitted to mainland Europe, spurring fears that other countries might experience a similar situation to Britain, CMC Markets U.K. analyst David Madden said by email.

U.K. Travel and Leisure Stocks Plunge on Fresh Virus Curbs

U.S. airline stocks were hit in premarket trading, with Delta Air Lines Inc., United Airlines Holdings Inc. and American Airlines all dropping about 3%. A member of the White House virus task force said at the weekend that the U.S. doesn’t yet need to suspend flights from Britain.

Local Lockdowns

Adjustments to the U.K.’s tiering system mean the mixing of households in London and large parts of the southeast is now banned, with socializing restricted to just Christmas Day across the rest of England. The measures are a fresh blow for pub and restaurant stocks like JD Wetherspoon Plc, which fell 8.8%, and Restaurant Group Plc, down 13%. “Tier restrictions will continue to have a severe adverse impact on profitability,” Liberum analyst Anna Barnfather wrote in a note to clients.

The enforced closure of non-essential retailers in areas with the highest level of restrictions weighed on Next Plc, which tumbled 5.4%, and Sports Direct owner Frasers Group Plc, down 6.3%.

Among stay-at-home winners, food delivery firms like Delivery Hero SE and Just Eat Takeaway both rose around 1%, while meal-kit maker HelloFresh SE firmed 0.4%. Work-from-home stocks TeamViewer AG and Logitech International S.A. both gained about 1%, while companies that benefit from Covid-19 testing demand also advanced, with DiaSorin SpA up 1.5%.

Elsewhere, U.K. exporters saw their declines cushioned by a weaker pound, as sterling slumped against the dollar on a double blow from the virus and lack of a Brexit trade deal as talks continue in Brussels. Weaker sterling tends to be a positive as earnings abroad are converted into pounds. Diageo declined 0.6%, while Unilever rose 0.2%.

The FTSE 100 Index was down 1.5% at 9:45 a.m. in London against the Europe Stoxx 600’s 2.1% drop, with the pound down 2.2% against the dollar. The U.K. FTSE 250 Index slid 2.1%.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.