European equities rebound but travel sector falls further

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European stocks gained ground on Tuesday after their biggest drop since June, although the travel sector continued to struggle.

London’s FTSE 100 and block-wide Stoxx 600 rose 0.6 percent early in the morning, while the German Dax was up 0.9 percent. The recoveries come following tough Monday sessions in Europe and Wall Street, in which the FTSE lost 3.4% and the S&P 500 lost 1.2%, amid concerns over the outlook for a global economic recovery.

Tuesday’s large gains come despite news that the UK and Spain are set to impose stricter lockdowns due to the rise in coronavirus infections.

The travel industry, which was hit hard on Monday by news of the worsening pandemic, has lost ground. British Airways owner International Airlines Group fell 1.8%, after losing 12% on Monday, while cruise line Carnival fell 2.9%.

The British pound slipped 0.4% to trade at $ 1.2760, its lowest level since July. In addition to anxiety over the pandemic, traders are increasingly concerned about the possibility of a no-deal Brexit.

Markets “collapsed yesterday as renewed fears over the coronavirus, a sharp drop in global bank stocks and numerous other headwinds led to a sharp sell-off in global risk assets,” said Jim Reid, analyst at the Deutsche Bank.

Investors will see an appearance by Andrew Bailey, Governor of the Bank of England, to get clues to the central bank’s intentions after saying last week it was paving the way for a move to negative rates, if it was deemed necessary.

In the United States, Jay Powell, the Chairman of the Federal Reserve, will tell Congress that businesses affected by the pandemic may need “direct tax support” as lawmakers in Washington struggle to agree on a plan to relaunch.

Futures have tipped the S&P 500 down a further 0.3% when US markets open later in the day.

Markets were “far from confident” in the Fed’s ability to generate 2% inflation, said Robert Rennie, head of global market strategy at Westpac. He added that “multiple political hot spots” in the United States, including a fight for a new Supreme Court appointment, had reduced the chances of another fiscal stimulus ahead of the November presidential election.

Mr Rennie said investors were also becoming concerned about the week-long holiday in China that would begin on October 1 and its impact on global demand for commodities. The markets are showing “signs of slowing down for a number of key products,” he added.

In the Asia-Pacific region, sales of HSBC and Standard Chartered shares increased. Hong Kong-listed HSBC shares fell 2% while StanChart’s fell 3%, bringing losses for each of the Asia-focused lenders to more than 10% over two days. The couple were among those named in media on Monday that suspected international banks had reported $ 2 billion in suspicious transfers to U.S. anti-money laundering authorities.

HSBC’s Hong Kong-listed shares have fallen by more than half this year, falling to levels not seen since the UK city’s transition to Chinese rule in 1997, after Covid-19, the rate cut interest and tensions between the United States and China have plagued its affairs.

Over the weekend, Chinese government tabloid The Global Times said the London-based bank is a candidate for inclusion in Beijing’s first list of “unreliable entities”. The list, not yet published, is intended to target companies believed to have harmed Beijing’s interests.

Matt Peron, research director at Janus Henderson Investors, said Monday’s sale amounted to a “correction” in a bullish market. “We think sentiment needs to cool down and become more realistic for the market down, and that could take a few weeks. We will then need a little clarity, or at least stability, on the Covid-19 and election fronts for the market to move higher from there, ”he said.

Oil prices stabilized on Tuesday, following a massive selloff the day before prompted by concerns about the outlook for global demand. Brent, the international benchmark, rose 0.3% to $ 41.55 per barrel.

Hong Kong’s benchmark Hang Seng was down 0.9%, while China’s CSI 300 of Shanghai and Shenzhen-listed stocks extended its losses to fall 1.2% on Tuesday. The Australian S & P / ASX 200 fell 0.7%. Japanese markets have been closed for a public holiday.

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