UPDATE 2-Travel stocks slump in Europe as virus cases surge, banks drag

  • Reuters
  • Stock Market News
UPDATE 2-Travel stocks slump in Europe as virus cases surge, banks drag
Credit: © Reuters.

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* Travel stocks slide after talks of second UK lockdown

* Euronext jumps on exclusive talks to acquire Borsa Italiana

* Bankia-Caixabank merger fails to boost banking stocks

* STOXX 600 posts small weekly gain

(Updates to market close)

By Sruthi Shankar

Sept 18 (Reuters) - European equity markets closed lower on Friday, with travel, banking and auto shares leading declines as a resurgence in coronavirus cases across the continent rekindled fears about the pandemic's impact on a nascent economic recovery.

The pan-European STOXX 600 index .STOXX fell 0.7%, with the banking-heavy Spanish index .IBEX down 2.2% and the French .FCHI and Italian .FTMIB bourses more than 1% lower.

London's FTSE 100 .FTSE slipped 0.7%, with British-Airways owner ICAG IAG (LON: ICAG ).L , easyJet EZJ.L and cruise operator Carnival (NYSE: CCL ) CCL.L down between 8% and 15% as talk of a second lockdown in the United Kingdom did the rounds after new COVID-19 cases almost doubled to 6,000 per day. and leisure was the worst-performing sector .SXTP , down 3.5%.

Other European nations from Denmark to Greece announced new restrictions to curb surging coronavirus infections in some of their largest cities. the uptick in cases becomes strong enough that lockdowns have to be tightened to a point that it derails the economic recovery, then it becomes a risk factor," said Mobeen Tahir, associate director of research at fund house Wisdom Tree.

The banking index .SX7P fell 2.6%, hitting its lowest level since May 26 and on course for record-lows as major central banks pledged to keep interest rates lower for a long time, with the Bank of England looking at taking borrowing costs to sub-zero levels, if needed.

Sparking hopes of consolidation among lenders battling the fallout from the COVID-19 pandemic, Caixabank CABK.MC agreed to buy state-owned Bankia BKIA.MC for 4.3 billion euros ($5.10 billion) to create Spain's biggest domestic bank. BKIA.MC fell 4.8% and Caixabank CABK.MC was down 2.2% after rallying in the run up to the announcement.

Swedbank SWEDa.ST , SEB SEBa.ST , Handelsbanken SHBa.ST and Nordea NDAFI.HE were down between 1.8% and 5.3% on fears that the Swedish banks will bear the brunt of a recently proposed government "risk tax". Sweden's financial watchdog said it was investigating Swedbank for potential market abuse. STOXX 600 still eked out 0.2% weekly gain as some major retail companies showed resilience in earnings earlier this week and a string of takeovers enlivened global M&A activity.

The London Stock Exchange Group LSE.L entered exclusive talks to sell Borsa Italiana to France's Euronext ENX.PA , driving its shares up 4.3%. telecoms gear maker Ericsson (BS: ERICAs ) ERICb.ST was up 1.3% after it agreed to buy U.S.-based wireless networking company Cradlepoint in a $1.1 billion deal.

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