April 19, 2010 / 2:54 PM / 9 years ago

Volcano market impact moves far beyond airlines

* Airlines, travel companies day’s worst performers

* Flight shutdown hits food, energy firms

* Greek IMF-EU talks delay boosts debt spreads

* Horticulture, tourism worries hit Kenya, Turkey

By Peter Apps

LONDON, April 19 (Reuters) - The impact of Europe’s volcano flight shutdown moved beyond airlines on Monday, rippling through food and energy producers and by delaying an IMF-EU meeting in Athens hitting Greek assets.

Even outside the area covered by the ash cloud, tourism worries hit Turkish stocks and the lira <TRY => while concerns over flower, fruit and vegetable exports were undermining the Kenyan shilling KES=.

Analysts said the main driver of market weakness on Monday was the fallout from fraud charges against Goldman Sachs (GS.N) on Friday, which hurt sentiment towards European banking stocks and boosted wider risk aversion.

But the volcano was becoming a key secondary driver.

Predictably, airlines and travel firms were the largest losers, continuing their fall from Friday as a shutdown of European air travel entered a fifth day.

British Airways BAY.L, Lufthansa (LHAG.DE), Iberia IBLA.MC, Ryanair (RYA.I), Aer Lingus AERL.I, Air France-KLM (AIRF.PA) and Finnair FIAIS.HE were down 2.7 to 7.7 percent.

Travel firm Thomas Cook (TCG.L) was the largest loser on the FTSE 100, down 3.9 percent. [ID:nLDE63I0LI]. Channel Tunnel operator Eurotunnel (GETP.PA) rose 2.7 percent as travellers sought other routes.

The airline industry says it is losing some $200 million a day, with many analysts assuming the costs will end up being borne by already overstretched governments.

“Talk of the need for government bailouts for airlines will surely just add to concerns over the state of public finances in Europe,” said Royal Bank of Scotland analyst Tim Ash.

“Presumably economies in Europe dependent on tourism will be disproportionately hit, depending on how long this all pans out. Unfortunately... the likes of Portugal, Greece and Spain look vulnerable, as does Dubai.”

Lower demand for jet fuel helped push crude oil CLc1 to a three-week low, with oil firms such as BP (BP.L) and Royal Dutch Shell (RDSa.L) down almost one percent

Food producers Nestle NESN.VX, Parmalat (PLT.MI) and Damisca DCO.CO lost 1.4 to 2.8 percent as they struggled to maintain supply lines without air cargo.

TURKEY, GREECE, KENYA SUFFER

The most striking indirect victim of the volcano cloud was Greece, which saw the spread between its bonds and German debt rise sharply after the flight shutdown forced the postponement of an International Monetary Fund and European Union meeting. [ID:nLDE63I0SB)

Markets are keen to see the activation of a possible 45 billion euro ($63 billion) loan bailout package

Further delays would further hurt Greek debt, currently priced as the riskiest it has been since it joined the euro.

Turkish markets also suffered, with analysts attributing the fall in part to worries that European tourism to Turkey would fall sharply even if the immediate disruption clears. [ID:nLDE63I0MU ].

The Turkish lira TRY= hit a 10-day low while stocks .XU100 hit a 2 1/2 week low.

The Kenyan shilling KES= slipped to its lowest against the dollar since March 25 largely on export worries, with an association of flower exporters warning they were losing up to $2 million a day [ID:nLDE63I0LY].

“It is weaker, but it is still roughly within its recent range,” said Standard Chartered chief African economist Razia Khan. “I think as everywhere markets are still taking the shutdown on a day by day basis. If it gets to a week and there is still no sign of things clearing, you could see a much wider sell-off.”

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