LONDON – Airlines and travel companies led world stock markets lower Monday as investors worried that a deadly outbreak of swine flu in Mexico could go global and derail any global economic recovery, though pharmaceutical companies rallied on expectations that demand for anti-viral drugs may surge to deal with any pandemic.
Investors are fretting that a flu outbreak could set back already-enfeebled global trade and travel, just at a time when policy-makers around the world have begun sounding more optimistic about the global economy's prospects.
"On top of a synchronized global financial and economic crisis, an outbreak of swine fever is the last thing we need just now," said Neil Mackinnon, chief economist at ECU Group.
By early afternoon London time, the FTSE 100 index of leading British shares was down 41.63 points, or 1 percent, at 4,114.36, while Germany's DAX fell 65.66 points, or 1.4 percent, to 4,608.66. The CAC-40 in France was 44.17 points, or 1.4 percent, lower at 3,058.68.
Wall Street was poised to give up most of the gains it made on Friday. Dow futures were down 129 points, or 1.6 percent, at 7,927, while the broader Standard & Poor's 500 futures fell 13.5, points, or 1.6 percent, to 853.
Earlier, most of Asia's markets were hit by the pandemic fears, with Hong Kong — one of the main focal points of the SARS virus concerns just six years ago — closing down 418.43 points, or 2.7 percent, to 14,840.42. Japan's Nikkei 225 stock average managed a gain of 18.35, or 0.2 percent, to close at 8,726.34 in back-and-forth trade.
Airlines and travel companies took the brunt of the selling amid concerns passengers could hold back from flying for fear of catching the virus, which has already reportedly spread as far as New Zealand.
In Europe, Deutsche Lufthansa AG fell 10 percent, while British Airways PLC was down more than 8 percent. Earlier, Australia's Qantas Airways fell 4 percent while Hong Kong-based Cathay Pacific Airways slid 8 percent.
Travel and hotel companies were also heavily sold off, with British cruise line firm Carnival PLC down more than 7 percent and German travel company TUI AG slid more than 4 percent as it revealed that it was suspending all trips to Mexico City as a precaution amid the outbreak of a deadly strain of swine flu.
While airlines and travel-related companies tanked, pharmaceutical companies enjoyed a modest rally in falling markets amid expectations that demand for anti-viral drugs would rise. Both Swiss drugmaker Roche Holding AG — the maker of Tamiflu — and GlaxoSmithkline PLC, which manufactures the Relenza drug, rose 4 percent.
Mexico officials say the flu strain may have sickened 1,614 people since April 13 but laboratory testing to confirm that and how many truly died from it — at least 22 so far out of the 103 suspected deaths — is taking time.
Worries about the epidemic's spread will likely remain at the forefront of investors' mind over the coming days and overshadowed any hopes generated over the weekend by the announcement from the Group of Seven finance ministers that the worst of the world recession may be over and that recovery may emerge by the end of the year.
"Market worries over a flu pandemic have drawn attention away from ministerial meetings that took place over the weekend," said Stephen Lewis, an analyst at Monument Securities.
Hopes that a recovery of sorts is on its way has helped world stock markets rally off multiyear lows in early March. Despite some range trading over the last couple of weeks, stocks began to rally strongly again at the end of last week, with the Dow Jones industrial average, for example, advancing 1.5 percent to 8,076.29 on Friday.
Elsewhere in Asia, Australia's stock measure gained 0.5 percent while Shanghai's fell 1.8 percent. Markets in Singapore, Taiwan and India retreated.
Oil prices dropped sharply as investors considered comments from OPEC suggesting the price was too low for companies to justify new investments in crude production. Benchmark crude for June delivery fell $2.50 to $49.05. The contract jumped $1.93 to settle at $51.55 last week.
In currencies, the dollar weakened to 96.64 yen from 97.17 yen. The euro traded lower at $1.3125 from $1.3161.
AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.