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What to Watch: Travel stocks slump, Old Mutual profits dive, and IPO boom continues

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·Senior City Correspondent, Yahoo Finance UK
·5-min read
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A flight attendant stands in front of the entrance of a new Lufthansa corona quick test center at the airport in Munich, Germany, Thursday, Nov. 12, 2020. Lufthansa starts the first test runs for comprehensive Covid-19 antigen rapid tests on selected routes between Munich and Hamburg. (AP Photo/Matthias Schrader)
A flight attendant stands in front of the entrance of a new Lufthansa corona quick test center at the airport in Munich, Germany, Thursday, Nov. 12, 2020. Photo: AP Photo/Matthias Schrader

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Travel stocks slump

Stocks linked to the travel sector sold-off on Tuesday, amid signs that a summer holiday season looked increasingly unlikely.

Germany announced a one month extension to national lockdown restrictions early on Tuesday morning, responding to what chancellor Angela Merkel called a "very serious" third wave of COVID-19 cases sweeping the country.

In the UK, the government announced tough new rules to deter people from traveling abroad with fines of up to £5,000. An official UK decision on whether international travel will be allowed over summer is due on 12 April. Experts have said it looks unlikely.

The news flow prompted a sell-off for stocks in or connected to the travel sector. British Airways-owner IAG (IAG.L) fell 3.8% in London, easyJet (EZJ.L) sunk 4.1%, and engine maker Rolls-Royce (RR.L) dropped 3%. MTU Aero Engines (MTX.F) dropped 2.2% in Frankfurt and Lufthansa (LHA.DE) sank 3.5%.

European markets in the red

Travel stocks led Europe lower on Tuesday as sentiment was hit by concerns about a COVID-19 third wave and geopolitical tensions focused on China.

The FTSE 100 (^FTSE) dropped 0.6% at the open in London, while the DAX (^GDAXI) was 0.5% lower in Frankfurt and the CAC 40 (^FCHI) fell 0.5% in Paris.

Naeem Aslam, chief market analyst at Avatrade, said investors were concerned that rising COVID-19 case numbers would prompt leaders elsewhere to "roll back some of the restrictive measures in Europe."

Sentiment wasn't helped by a sell-off in Asia overnight. Japan's Nikkei (^N225) sunk 0.6% and the South Korean's KOSPI (^KS11) shed 1%.

European markets pull back over COVID third wave fears

In China, the Hong Kong Hang Seng (^HSI) slumped 1.3%, the Shanghai Composite (000001.SS) dropped 0.9%, and the Shenzen Component (399001.SZ) slid 1.1%.

"The underperformance of Chinese bourses is likely due to the US, UK and Canada joining the EU to impose sanctions on the country over alleged human rights abuses on the Uyghurs in Xinjiang," said Jim Reid, a senior strategist at Deutsche Bank.

The UK announced travel bans and froze assets of four individuals in connection with abuses in China, part of a coordinated move led by the United States. UK foreign secretary Dominic Raab said the treatment of the Uyghur Muslims in Xinjiang was "one of the worst human rights crises of our time."

Wall Street looked set for a lower open. S&P 500 futures (ES=F) were down 0.2%, Dow Jones futures (YM=F) were 0.3% lower, and Nasdaq futures (NQ=F) were down 0.1%.

UK unemployment unexpectedly falls

The UK's unemployment rate has unexpectedly dipped to 5%.

The Office for National Statistics (ONS) confirmed on Tuesday that the jobless rate was 5% in the three months to January, down from 5.1% in December. Economists had expected the rate to tick up to 5.2%.

“The labour market is showing some signs of resilience in the face of covid-19," said Tej Parikh, chief economist at the Institute of Directors.

"The pandemic has led to an unprecedented rise in job losses, but with continued support from the furlough scheme and the economy now gradually reopening, worst case scenarios are now slowly coming off the table."

The pound briefly strengthened against the euro in the wake of the data but was trading flat by 9.15am (GBPEUR=X).

Old Mutual profits dive

Profits sunk last year at Old Mutual (OMU.L), the London-listed African financial services group.

Old Mutual said on Tuesday that its adjusted earnings sunk by 75% last year to R2.4bn (£120m). Earnings from ongoing operations, excluding COVID costs, fell by 14% but the impact of the pandemic pushed reported earnings down by 81%.

"2020 was one of the most challenging years our organisation has ever faced," chief executive Iain Williamson said. "The fundamentals of our business were tested through this extreme scenario but we remained true to our purpose."

Old Mutual said it did not expect to return to pre-pandemic levels of business until 2023. The business cut its dividend in half.

Shares fell 3.5% in London.

IPO boom continues

The rush to go public in London continues.

Consumer reviews Trustpilot confirmed details of its upcoming initial public offering (IPO) on Tuesday, while fintech business PensionBee announced its intention to float.

Trustpilot priced its IPO at 265p-per-share, valuing the company at £1.1bn ($1.5bn). This was the top end of the firm's indicative price range, meaning it has raised £473m through the sale of 161 million shares. It had been valued at $1.4bn earlier this month.

Separately, PensionBee announced its intention to float on the London Stock Exchange. Founded in 2014, the company makes software that helps people manage their pensions. The company currently has 130,000 customers and £1.5bn of assets under administration.

The announcement extends a flurry of IPO activity in London since the turn of the year. Deliveroo announced detailed of its hotly anticipated IPO on Monday, signalling the food delivery startup would be valued at between between £7.6bn ($10.5bn) and £8.8bn when it floats.

Additional reporting by Lucy Harley-McKeown

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