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Flu fears hit Mexican markets, but global reaction is muted

April 27, 2009 | 10:22 am

Mexico's stock market and U.S. airline shares are taking a pounding today on fears about the potential economic impact from the swine flu outbreak, but markets overall are staying mostly calm.

Gold, the usual winner when panic breaks out, got a modest early lift but has given it up.

Some analysts say the fast response from major governments to the swine flu threat is giving investors comfort for the moment.

"While the outbreak has potential to create additional problems for the global economic slowdown, so far officials have responded quickly and decisively to the outbreak, something that did not happen during the SARS outbreak" in 2003, currency analysts at Brown Bros. Harriman said in a note to clients today.

MexicantouristtIn Mexico, the epicenter of the flu crisis, the IPC stock index was down as much as 5.1% earlier today, but at about 10:10 a.m. PDT, the index had pared its loss to 913 points, or 4%, to 21,668. That put it back into the red year-to-date, off 3.2%.

"The flu outbreak comes at a time when the Mexican economy is already weakening rapidly -- retail sales fell for the last 6 months -- and is likely to weigh further on the tourism industry and overall consumer spending," said Vassili Serebriakov, a currency strategist at Wells Fargo Bank.

The peso has slumped 3.7%, to 13.84 per dollar from 13.34 on Friday.

But the dollar is only modestly higher against other major currencies, indicating there’s no global rush to the usual haven of the buck.

Likewise, U.S. Treasury bond yields are only a bit lower, and gold futures are off $3.60 to $910.50 an ounce in New York.

On Wall Street, the Dow Jones industrial average was off 12 points, or 0.2%, to 8,064.50 at about 10:10 a.m. PDT, after gaining 1.5% on Friday.

But airline shares were broadly lower -- the inevitable knee-jerk reaction to concerns about a potential depressant effect on global travel.

Continental Airlines was down $1.42, or 11%, to $11.83. American parent AMR was off 57 cents, or 10.5%, to $4.85; Delta Air Lines was down $1, or 12.7%, to $6.88.

Carnival Corp., the cruise company, also is being hammered, off $3.36, or 11.8%, to $25.07. Hotel stocks, including Starwood Hotels and Wyndham Worldwide, also slumped.

-- Tom Petruno

Photo: A tourist arriving in Miami after a flight from Mexico City. Credit: J. Pat Carter / Associated Press