European Stock Market Slumps Amid Islamic Terror Attacks

LONDON, July 21 (Reuters) – European stock markets fell on Thursday, weighed down by a drop in the shares of major airlines after Lufthansa issued a profit warning.

The pan-European STOXX 600 index and the similar FTSEurofirst 300 were both down by 0.5 percent, with many investors focusing on the European Central Bank’s meeting later in the day. The euro zone’s central bank is all but certain to keep rates firmly on hold although it may signal tweaks to its stimulus measures as it tries to address obstacles to its efforts to revive growth and inflation.

Airline stocks fell sharply amid fears that consumers may be off travelling abroad for holidays by last week’s attack in Nice, for which militant group Islamic State has claimed responsibility, and attempted coup in Turkey.

Lufthansa slid 8 percent after issuing a profit warning, with rival Air France-KLM also falling 4.3 percent. easyJet dropped 4.5 percent after posting lower revenues.

“The airline sector is under pressure. We don’t own any airline stocks for now and we prefer the tech and healthcare sector,” said Francois Savary, chief investment officer at Geneva-based fund management and consultancy firm Prime Partners.

Savary pointed to Temenos’ results as continuing this week’s positive trend in the European technology sector, with shares in SAP rising after results while ARM surged after a takeover from Softbank.

Swiss software group Temenos climbed 5.8 percent after the company reported forecast-beating interim results.

Savary also backed holding healthcare stocks such as Roche , which edged up after its interim results, as offering good “defensive” protection via their solid dividends and profits in the current uncertain market climate.

While the STOXX 600 is up around 10 percent from a low point reached in late June after markets slumped in the immediate aftermath of Britain’s shock vote to leave the European Union, the index remains down 7 percent since the start of 2016.

Last month’s Brexit vote has added to market uncertainty and is expected to impact the British and European economies, which in turn could put more pressure on the ECB to find ways to prop up euro zone markets and the region’s economy.

“I’d find it hard to justify buying the markets at these current levels,” said Richard Griffiths, associate director at Berkeley Futures.