European shares slid on Friday and the travel industry was among the biggest losers after London’s Heathrow Airport announced a temporary closure. Recent moves on monetary policy from several central banks also weighed on broader market sentiment.
Market Indices: Downward Trend
The pan-European Stoxx 600 closed down around 0.6 percent, as did France’s CAC 40 and the U.K.’s FTSE 100. Germany’s DAX index fell, down 0.5%. The travel and leisure sector faced the most acute hits, down 1.6%, owing in part to the disruption at Heathrow airport. Basic resources also posted hefty losses, with ArcelorMittal and Stora Enso losing 2.3%.
HEATHROW AIRPORT SHUTDOWN HITS TRAVEL INDUSTRY
Travel stocks were, however, dented following the temporary closure of Heathrow Airport after a fire at a local electrical substation. Shares in International Airlines Group (IAG), which owns British Airways, dipped around 1.9%. The outage at one of Europe’s busiest airports compounded what has already been a challenging period for the travel and leisure industry.
Major swings in risk appetite related to updates to central bank policy
European investors were parsing a series of monetary policy updates from several central banks this week. The Bank of Russia held its key interest rate steady at 21%, citing ongoing inflationary pressures. But the Swiss National Bank lowered rates 25 basis points. The Bank of England and Sweden’s Riksbank chose to leave their interest rates unchanged.
Geopolitical and tariff uncertainties
In its statement, the Bank of England pointed to growing uncertainties about global trade policy and geopolitical tensions. Recent announcement of tariffs by the United States and retaliatory response from other governments have been affecting the outlook, the statement said. The central bank also noted an uptick in volatility in financial markets worldwide. Such factors were among reasons for a more cautious feeling among investors in Europe.
US Federal Reserve Economic Outlook
The U.S. Federal Reserve also decided Wednesday to keep its benchmark interest rate steady. The central bank continues to expect two cuts this year but cut its economic growth forecast for 2025. The Fed also said uncertainty was growing, particularly about the inflationary effects of tariffs. Such data added dovish tone in Europe where most investors sealed 2015 end with slowdowns of the world economy.
All this local market events such as close the Heathrow Airport together with some global macroeconomic dynamics such as the central bank policy makers decisions caused more confusion for doing trade in EU market. The steep downturn set off by the travel industry underscored how sensitive the market is to unexpected disruptions, which can have a ripple effect in related companies. The blow to IAG — the largest operator in European aviation — highlighted the sensitivity of travel-related companies to disruptions in operations.
A note of increased uncertainty around the world from the Bank of England, which left interest rates on hold, added to the cautious mood. US Federal Reserve officials were aware of inflationary pressures associated with tariffs. The policies sent chills down investors spines, as more could directly impact corporate profits and overall market was rattled.
Another sign of how markets were reacting to fears of the world’s growth and trade slowing was the decline in the basic resources sector. An industry sensitive to commodity prices and international trade flows, it was especially subject to the uncertainties they introduced. The pullback in the broader market was relatively modest, but it marked a more cautious mood among investors as they attempted to digest the difficult-to-read stew of economic and geopolitical headlines. “It’s highlighted the interconnectedness of the global markets, and the need to be aware of domestic disruptions as well as global economic news.”
