The Daiy Star :

Swine flu chills world economy

Travel, tourism sectors take a hit; pharmaceutical shares rise

The global outbreak of swine flu sent shivers through financial markets on Monday just as some signs had appeared that the global economic crisis might be easing.

Travel and tourism took the brunt of uncertainty about how the threat of a pandemic might crimp economic activity, but the pharmaceutical sector rose as attention turned to defensive medical treatments and equipment.

The latest swine fever scare scythed through stock markets, cutting back gains made last week on some signs that the global economic crisis may be bottoming out.

But some pharmaceutical groups were in fine form on prospects for sales of their flu treatments and related supplies.

In Europe, Societe Generale analyst Patrick Bennett said: "The outbreak of swine flu in Mexico is a concerning development for the global economy."

At financial betting firm ETX Capital in London, trader Manoj Ladwa said: "Swine flu is ripping through the markets creating uncertainty in its wake."

Investors turned anxious where at the end of last week they had shown some optimism that the financial fever which has ravaged economies for the last 20 months may be abating.

The one flu-resistant sector was the pharmaceutical industry. Swiss giant Novartis said the World Health Organisation had contacted it about developing a vaccine.

And shares in Swiss drug giant Roche showed a gain of 3.51 percent on prospects of a surge in demand for its treatment Tamiflu.

An analyst at Vontobel in Switzerland, Andrew Weiss, said that shares in Roche had surged "when fear about bird flu really took hold in the fourth quarter of 2005" and the group's sales of Tamiflu had totalled 4.0 billion Swiss francs (2.65 billion euros, 3.49 billion dollars) in 2006 and 2007.

GlaxoSmithKline, AstraZeneca and Shire all showed gains, and stock in Chugai Pharmaceutical, which sells the Tamiflu drug, climbed 14 percent.

A perception that the first sector to be hit would be the travel industry was given substance by EU Health Commissioner Androulla Vassiliou who urged people to avoid non-essential travel to flu-affected areas.

This provoked a sharp retort in the United States, where a state of public health emergency has been declared.

The bird flu epidemic that began in 2003 reduced the number of international travellers by 1.4 percent that year, data from the World Tourism Organisation shows.

In May of that year, traffic for airlines in the Asia-Pacific region where the crisis began, slumped by nearly 50 percent, the International Air Transport Association reported, costing those airlines six billion dollars in lost sales in 2003.

This swine fever scare, originating in Mexico, was likely to hit US and Latin American airlines hardest, followed by European airlines and notably the Spanish company Iberia, which operates most routes between Europe and South America, a French analyst who declined to be name, suggested.

The travel industry was already one of the sectors suffering greatly from the global economic crisis as businesses and consumers curtail expenditure.

The World Tourism Organisation had forecast zero growth to a contraction of 2.0 percent for international tourism this year after growth of 2.0 percent in 2008.