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Not a Second Wave Yet, But…

27 July 2020 by lberuti

While the pandemic is showing no sign of abating in many parts of the world, Europeans had become used to hearing about deconfining and easing measures. No one walking the streets of London or Paris would talk about a return to normal, but at least it seemed things were heading in the right direction. So, it came as a shock that lockdown and quarantine might be back on the agenda, after a recent rise of cases in a number of areas triggered some vigorous actions. The French government warned its citizens against holidaying in Catalonia, and the UK government went as far as imposing a 14-day quarantine on travellers from mainland Spain due to rising numbers of coronavirus cases there. The market today started pricing in the risk of restrictions in more countries, and the severe impact such measures could have on consumer confidence generally speaking, and on holiday bookings more specifically. Analysts fear that the European tourist season which had only recently began to recover from lockdowns and travel bans may be hit anew. Most airlines, cruise operators and holiday sellers were affected. They saw their shares fell and their risk premia increased meaningfully. TUIGR ( TUI Group ), the world’s largest integrated tourism company, was not spared. Its stock fell more than 12% and its 5-year CDS jumped 220bps to 1,200bps. The move dented the confidence which had recently returned to a certain extent, and put an abrupt halt to the positive momentum which had built since late June.