Swine fever sickens stocks, travel and tourism

April 28, 2009
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, PARIS, Apr 28 – The global outbreak of swine flu spread fear of economic contagion through financial markets and the travel sector on Monday, blighting any green shoots of recovery from the financial crisis.

The travel and tourism sectors were hit particularly hard by memories of how the bird flu scare that began in 2003 had reduced the number of travellers and cost the airline sector billions of dollars.

The latest swine fever scare scythed through stock markets, cutting back gains made last week on some signs that the global economic crisis may be bottoming out.

But some pharmaceutical groups were in fine form on prospects for sales of their flu treatments and related supplies.

Wall Street showed an opening fall of 0.96 percent after losses in Europe of 0.71 to 2.54 percent, a slight gain in Tokyo where the yen firmed against a flu-weakened dollar, and sharp falls in Hong Kong and South Korea attributed mainly to flu fever.

"The world won\’t come to a standstill, but already the market is digesting swine flu stories with a forlorn perspective that a global pandemic is inevitable," said Patrick O\’Hare at Briefing.com. in New York.

"The attendant consequences for economic growth of a global pandemic wouldn\’t be good at all, of course, but the fear is way more pressing than the reality at this time."

In Europe, Societe Generale analyst Patrick Bennett said: "The outbreak of swine flu in Mexico is a concerning development for the global economy."

At financial betting firm ETX Capital in London, trader Manoj Ladwa said: "Swine flu is ripping through the markets creating uncertainty in its wake."

Matt Buckland, a dealer at betting firm CMC Markets, said that the news about flu "is rocking financial markets."

Investors turned anxious where at the end of last week they had shown some optimism that the financial fever which has ravaged economies for the last 20 months may be abating.

The one flu-resistant sector was the pharmaceutical industry. Swiss giant Novartis said the World Health Organisation had contacted it about developing a vaccine.

And shares in Swiss drug giant Roche showed a gain of 3.51 percent on prospects of a surge in demand for its treatment Tamiflu.

An analyst at Vontobel in Switzerland, Andrew Weiss, said that shares in Roche had surged "when fear about bird flu really took hold in the fourth quarter of 2005" and the group\’s sales of Tamiflu had totalled 4.0 billion Swiss francs (2.65 billion euros, 3.49 billion dollars) in 2006 and 2007.

GlaxoSmithKline, AstraZeneca and Shire all showed gains, and stock in Chugai Pharmaceutical, which sells the Tamiflu drug, climbed 14 percent.

A perception that the first sector to be hit would be the travel industry was given substance by EU Health Commissioner Androulla Vassiliou who urged people to avoid non-essential travel to flu-affected areas.

This provoked a sharp retort in the United States, where a state of public health emergency has been declared.

The top disease control official Richard Besser said: "At this point, I would not put out a travel restriction or recommendation against coming to the United States."

But as soon as trading began on Monday, some travel shares fell.

Shares in Air France-KLM were showing a fall of about 7.0 percent, British Airways 8.0 percent and Lufthansa of Germany 10 percent. Shares in Japan Airlines fell 5.2 percent and in Cathay Pacific 8.0 percent.

Stock in French hotel giant Accor fell sharply as did stock in the German tourism giant TUI which said it was cancelling all trips to Mexico City, where the swine flu outbreak began, until May 5.

Stock in cruise liner group Carnival showed a fall of 6.50 percent.

Pig flu also drove down oil prices with the threat of a drop in air travel, analysts said.

The bird flu epidemic that began in 2003 reduced the number of international travellers by 1.4 percent that year, data from the World Tourism Organisation shows.

In May of that year, traffic for airlines in the Asia-Pacific region where the crisis began, slumped by nearly 50 percent, the International Air Transport Association reported, costing those airlines six billion dollars in lost sales in 2003.

This swine fever scare, originating in Mexico, was likely to hit US and Latin American airlines hardest, followed by European airlines and notably the Spanish company Iberia, which operates most routes between Europe and South America, a French analyst who declined to be name, suggested.

But Iberia told AFP that so far on Monday "our flights are operating normally."

The travel industry was already one of the sectors suffering greatly from the global economic crisis as businesses and consumers curtail expenditure.

The World Tourism Organisation had forecast zero growth to a contraction of 2.0 percent for international tourism this year after growth of 2.0 percent in 2008

Last month IATA forecast that airlines would have one of their worst years on record this year.

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