Europe: Shares end week higher; airlines hit by Heathrow closure

European Shares Fall Amid Trade Tensions and Geopolitical Uncertainties

Market Overview

European shares fell on Friday, following a third consecutive session of declines, as concerns over trade tensions and geopolitical conflicts continued to weigh on investor sentiment. The pan-European Stoxx 600 index lost 0.6 percent, with the travel and leisure sector being the hardest hit.

Heathrow Airport Closure

The closure of Heathrow Airport in London, which was shut down due to a fire, also had a significant impact on the market. The airport, which is Europe’s busiest, was forced to shut down after a fire knocked out its power supply. This led to a sharp decline in shares of airlines such as British Airways, Lufthansa, and Ryanair, which dropped 1.9 percent, 1.7 percent, and 2.3 percent, respectively.

Sector Performance

The travel and leisure sector as a whole closed 1.6 percent lower, while basic resources miners fell 2.6 percent, with copper prices retreating from multi-month highs. Industrials also declined 1.5 percent.

Expert Analysis

Sree Kochugovindan, senior research economist at Aberdeen, noted that the full extent of the impact will depend on how quickly the airport reopens and whether this is a one-off incident. He added that the near-term impact for airlines and businesses reliant on cargo is likely to be significant but temporary.

Central Bank Policies

Meanwhile, major central banks have flagged uncertain growth outlooks amidst global trade uncertainties and the Russia-Ukraine conflict. The Federal Reserve and the Bank of England kept rates on hold at their meetings this week, while the European Central Bank president Christine Lagarde warned that a 25 percent tariff imposed by the US would lower eurozone growth by about 0.3 percentage point in the first year, while retaliatory measures could increase this to about half a percentage point.

Conclusion

The European market closed 0.5 percent higher on the week, following the passage of reforms in Germany aimed at reviving the economy. However, concerns over weaker growth, higher inflation, and the ongoing trade tensions kept a lid on risk appetite.

Frequently Asked Questions

Q: What was the impact of the Heathrow Airport closure on the market?
A: The closure of Heathrow Airport led to a sharp decline in shares of airlines and travel companies, with the travel and leisure sector closing 1.6 percent lower.

Q: What was the performance of the basic resources sector?
A: The basic resources sector fell 2.6 percent, with copper prices retreating from multi-month highs.

Q: What is the outlook for the European market?
A: The market is expected to remain uncertain, with concerns over trade tensions, geopolitical conflicts, and weaker growth keeping a lid on risk appetite.