Europe close: Equities edge higher but travel stocks remain under pressure following Paris attacks

Most European stocks reversed early losses and edged slightly higher on Monday, although travel-related stocks remained under the cosh following Friday’s terrorist attacks in Paris.

The benchmark Stoxx Europe 600 index closed up 0.29%, while France’s CAC 40 shed 0.08% and Germany’s DAX gained 0.05%. Early expectations had been for the main European indices to fall between 2% and 3%.

As of 1638 GMT, the euro was broadly flat against the dollar and the yen but lost 0.39% against the pound, while Brent crude tumbled 2.80% to $43.26 a barrel.

On Sunday night, French aircraft carried out a series of airstrikes on Islamic State targets in Syria in the wake of the terrorist attacks that killed 129 in Paris on two days earlier.

On Monday afternoon, France president Francois Holland vowed the country will expand operations in Syria, adding he will meet US President Barack Obama and Russia President Vladimir Putin later this week.

“Investors have been attempting to work out what the aftermath of the events in Paris will be,” said IG’s senior market analyst Chris Beauchamp.

“Concerns are rife that tightened border controls will lead to lower economic growth, thus prompting the ECB to boost and/or lengthen its stimulus programme.”

Travel stocks under pressure

Friday’s attacks on the French capital put travel and leisure stocks under pressure, with Air France KLM, British Airways parent International Consolidated Airlines Group and Lufthansa losing 5.67%, 2.87% and 2.62% respectively. Eurotunnel, which controls the Channel Tunnel, lost 3.04%, while French hotel group Accor slid 4.71%.

“The possible re-introduction of border controls and other tighter forms of security as well as the potential knock to traveller confidence has sent travel and leisure stocks lower […]on the potential impact the terror attack could have tourism, typically a large source of demand for luxury goods,” said CMC Markets’ analyst Jasper Lawler.

Elsewhere, Hennes & Mauritz fell 0.96% after the fashion retailer’s October sales came in short of expectations, while Sonova Holding AG tumbled 7.76% after the hearing aid maker downgraded its sales and profit forecasts for the year.

On the macroeconomic front, the final reading on consumer price index for October showed 0.1% growth year-on-year last month, compared with a previous estimate indicating stagnant growth and with analysts’ expectations for an unchanged reading.

On a month-on-month basis, CPI advanced 0.1% in October, in line with forecast but slightly lower than the 0.2% reading analysts expected.