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Airlines, tourism stocks under pressure after Paris

Shares in some of Europe's largest travel and leisure firms fell on Monday after the terror attacks launched against Paris over the weekend, as investors feared the tragic events may have lasting implications for tourism in the region.

Air-France KLM came under severe selling pressure, tumbling over 7 percent towards the bottom of the pan-European STOXX 600 on worries the attack would hurt tourism in the euro zone's second largest economy.

Air France planes are parked on the tarmac of Roissy Charles-de-Gaulle airport.
Gabriel Bouys | AFP | Getty Images
Air France planes are parked on the tarmac of Roissy Charles-de-Gaulle airport.

Other European carriers including German group Lufthansa and British Airways parent International Airlines Group (IAG) both fell over 2 percent.

Budget airlines Ryanair and EasyJet were also over 1 percent down in afternoon trade.

France launched airstrikes against IS Sunday and enters a third day of mourning after deadly attacks in Paris killed 129 people on Friday.

The Islamist militant group that calls itself "Islamic State" (IS) claimed responsibility for the attacks. France responded at the weekend by launching air strikes against IS targets in Syria.

France is one of the most popular destinations for tourists in the world, and its tourism sector accounts for almost 7.5 percent of the country's gross domestic product (GDP), according to official data.

"Tourism and travel services are the sector where we would expect to see the largest adverse impact, with some substitution effects towards other destinations, perhaps elsewhere in France away from Paris, but more likely benefiting other European capitals, unless the phenomenon were to spread to other countries," said analysts led by euro zone economist at Citigroup, Guillaume Menuet in a note to clients.

European bourses fluctuated throughout the session on Monday, with the broader STOXX 600 index trading flat. French and German stocks both traded 0.4 percent and 0.1 percent lower respectively, while London's FTSE managed to hang onto some gains.

French hotel group Accor, which is headquartered in Paris was also trading over 5 percent, while U.K.-listed hotel chains Intercontinental and Whitbread were both down in the region of 1 percent. Travel agent Thomas Cook also slipped over 4 percent.

Elsewhere luxury stocks were also met with investor concern, with the likes of LVMH, Kering, Christian Dior and Hermes International all trading lower.

"On balance, we think that the risks to our 2016 France 1.4 percent real GDP forecast are likely skewed to the downside. On the negative side, household confidence will likely be affected – at least temporarily – and a number of shopping days could be lost," Menuet said

"On the positive side from a GDP standpoint, we expect extra spending on policing, private security and military intervention in coming months and quarters," he added.