Travel stocks push European shares lower

LONDON: European shares ended lower on Monday, led by travel and energy stocks over rising Omicron variant risks, while a wave of central bank policy decisions this week kept investor sentiment subdued.

The pan-European benchmark STOXX 600 erased early session gains to end 0.4% lower, marking its fourth consecutive day in the red.

Travel stocks dropped 2.6% on risks of tougher movement restrictions after the United Kingdom reported its first death from the Omicron coronavirus variant.

London’s FTSE 100 and FTSE 250, dropped 0.8% and 1.2% respectively, to mark their worst session in two weeks. UK travel stocks dropped 3.5%.

Oil prices weakened on worries the new variant and related curbs would hit demand. Europe’s energy sector lost with Royal Dutch and BP down between 2.2% and 2.7%.

“Creeping headlines about the Omicron variant are weighing on traders’ minds,” said David Madden, market analyst at Equiti Capital.

Investor focus is on monetary policy decisions expected to be taken by the European Central Bank (ECB), the US Federal Reserve, the Bank of England and the Bank of Japan this week.

The ECB is set to halve the amount of assets it buys each month from April, according to a Reuters poll, which judged that a reprieve from high euro zone inflation by late 2022 means a rate hike is years away.

“It’s going to be a relatively dovish week due to Omicron,” said Willem Sels, global chief investment officer at HSBC, adding that the ECB is likely to keep its pandemic emergency purchase programme (PEPP) in place due to the emergence of the new variant.

Concerns about the fast-spreading Omicron variant and surging inflation have spurred bouts of selling in the markets recently, keeping the STOXX 600 over 3% below its all-time high hit in mid-November.

On the upside, Vifor Pharma surged 18.5% after the Swiss drugmaker and Australia’s CSL both confirmed they were talking about a potential merger.

Norwegian aluminium maker Norsk Hydro rose 2.7% after raising its cost-cutting targets and announcing plans to pay a bigger dividend for 2021 following a jump in earnings.

Daimler Truck rallied almost 11%, extending gains after a strong debut in Friday, with Citigroup starting coverage with a “buy” rating.