Here is why hotel and airline stocks fall today - London Capital Markets

Travel stocks are bearing the burden of Monday’s selloff, reflecting fears that European tourism will be hit by worries over terrorism.

Air France’s shares dropped nearly 6%, while Eurotunnel is down over 4%.

British Airways’s parent company IAG is the biggest loser in London, down 3,5%.

And other areas of the tourism sector are also seeing a reaction - with Intercontinental Hotels down 2.07%.

City analyst Ipek Ozkardeskaya, of London Capital Markets, explains why hotel and airline stock have fallen today:

"Rising terrorist threats will certainly impact tourist arrivals to big European cities as Paris, London and Berlin before the festive Christmas period."

On the other hand, the rising geopolitical tensions between the West and the Islamic State, strengthening of security measures in big European cities and the air strikes in Syria are expected to boost government spending on police and military and could drive a short-term domestic demand, she adds.

On Friday, November 13, Paris saw a series of suicide bombings and shootings which left more than 130 people dead. Bombings killing 44 people also happened in Beirut, Lebanon. Another act of terror occurred in Iraqi capital on Sunday which killed at least 7 people and injured 15.

The vice-president of the European Central Bank has warned that Friday night’s terror attacks could hit investor confidence in Europe.

Speaking at a conference Frankfurt, Vitor Constâncio condemned the “terrible events” in Paris, and cautioned that "it can compound all the problems that we were already facing."

Markets are currently “taking it calmly” so far, Constâncio pointed out. But it’s too early to know the economic cost of the attacks, as the upcoming events will cause loss aversion.