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* European travel & leisure index sinks to 2-month low
* Ryanair cuts annual passenger target by quarter
* SAP shares jump on plans to spin off Qualtrics
* German business morale brightens further in July - Ifo (Updates to market close)
By Sruthi Shankar
July 27 (Reuters) - European shares slipped on Monday with travel stocks leading the declines after Britain imposed a two-week quarantine on travellers returning from Spain after a surge in coronavirus cases.
The pan-European STOXX 600 closed down 0.3%, extending declines after it recorded its first weekly fall in four on Friday.
Travel and leisure stocks dropped 3.4%, with UK-based airlines and tour operators such as TUI , Easyjet, British Airways-owner IAG falling between 6% and 11.3%.
The broader index sank to a two-month low, further cementing its status as the worst performer in Europe this year with a 40% loss.
Adding to the sector’s woes, Ireland’s Ryanair cut its annual passenger target by a quarter and warned a second wave of COVID-19 infections could lower that further.
Lufthansa and Air France dropped about 5% each after the British government said it was watching the situation in Germany and France closely.
Spanish stocks fell 1.7%, lagging its European peers, also hit by a weakness in banking shares.
“There’s always been this concern when lockdown measures were released that we would have a resurgence in cases and reimposition of social restrictions,” said Alastair George, head strategist at Edison Investment Research.
“It does not just impact people going on holidays as the risk is economies have to shut down again. But that has not happened, which is why you have a measured response to the news over the weekend.”
Germany’s DAX stayed afloat, helped by a 2.7% gain for software giant SAP SE after it announced plans to spin off and float Qualtrics, the U.S. specialist in measuring online customer sentiment.
Still, concerns over a resurgence in coronaviurs cases overshadowed an Ifo Institute survey that showed German business morale improved further in July after posting a record increase in June.
Investors globally were on edge as ties between the world’s two largest economies deteriorated after China took over the premises of the U.S. consulate in the southwestern city of Chengdu in retaliation for China’s ouster last week from its consulate in Houston, Texas.
French car parts group Faurecia fell 6.4% after saying that it expects to return to profit and cash generation in the second half of the year, helped by cost controls.
Ubi Banca fell 8.8%, while Intesa Sanpaolo slipped 0.8% after the expiry of a deadline for investors to buy Ubi Banca’s shares and tender them in Intesa Sanpaolo’s takeover offer, the day before the formal end of the offer. (Reporting by Sruthi Shankar in Bengaluru; Editing by Saumyadeb Chakrabarty and Uttaresh.V and Maju Samuel)