United Kingdom stocks were sharply lower on Thursday as news of a foiled plan to blow up aircraft in mid-flight sent shockwaves through the market, with British Airways (BA) particularly hard hit, along with other stocks tied to the airline and leisure industries.
Outside the equity markets, UK gilts jumped as some investors bought into safe-haven assets, and sterling fell.
A number of people were arrested in the London area for links to the plot to destroy planes flying between Britain and the United States, police said, and all in-bound flights from Europe into London’s Heathrow airport were cancelled.
Shares in BA fell 4,8% and hotels group InterContinental lost 3,6%, while jet-engine maker Rolls Royce eased 3,3%. Cruise operator Carnival dropped 1,8%, and mid-cap holiday firm MyTravel fell 5%.
By 8.57am GMT, the FTSE 100 index of Britain’s leading shares was down 81,6 points, or 1,4%, at 5 778,9, though off an earlier trough and two-and-a-half-week low. The drop was mirrored across Europe, with the FTSEurofirst 300 down 1,5%, but analysts said they did not expect the drop to be long-lived.
”Usually wars and terror events or rumours of them tend to have relatively short-term effects on markets. The immediate impact, obviously, is that it causes people to become a bit more risk-averse and disengage from the markets, which means markets will tend to fall back,” said Andrew Bell, equity strategist at Rensburg Sheppards.
”The investment message I pick up from this is not particularly that I’m going to be negative on equities for more than a day or two. It’s more that it’s going to make investors much more wary about buying into airport and airline stocks, because even if the economy generally trundles on regardless, you could well have a more persistent reduction in air transport, where people don’t fly unless they need to.”
News of the plot comes after stocks have struggled to make headway in recent weeks on persistent concerns about interest rates, oil prices and the outlook for economic growth. — Reuters