UPDATE 1-European travel stocks sink, inflation woes keep STOXX 600 below record high

Shante Abdo

(For a Reuters live blog on U.S., UK and European stock markets, click LIVE/ or type LIVE/ in a news window)

* TUI, Ryanair, IAG tumble as Asia COVID-19 cases spike

* Banking, mining, and industrial stocks retreat

* Healthcare and energy stocks set to post solid monthly gains

* Burberry plunges as CEO resigns to join Ferragamo (Adds comments; updates prices)

By Sagarika Jaisinghani

June 28 (Reuters) – European travel stocks sank 2% on Monday on the back of a spike in COVID-19 cases across Asia, while worries of a sudden tapering in ultra-loose global monetary policy in the wake of rising inflation kept the STOXX 600 below record highs.

The pan-European STOXX 600 was down 0.2% by 0813 GMT, with travel-related stocks TUI, Ryanair Holdings and IAG sliding between 1.9% and 3.2%.

The travel and leisure index fell to a one-month low, tracking declines in Asia as infections ballooned of the highly contagious Delta strain of the novel coronavirus.

The benchmark STOXX 600 tumbled from record highs hit just over a week ago as global financial markets turned choppy following signals the U.S. Federal Reserve could start raising interest rates sooner than expected.

Although the index has since recovered as Fed officials sought to assuage those fears and the European Central Bank reiterated it was too soon to taper stimulus in the continent, it has so far been unable to cross its all-time closing high hit on June 16.

“Summer may be the break for markets to de-couple policy ramifications from imminent policy action,” said Vishnu Varathan, head of economics and strategy at Mizuho.

“But rather than misinterpreting de-coupling as an unqualified reinstatement of the ‘risk on’ trade, it needs to be correctly understood as more unpredictable market dynamics are either de-sensitized or short-circuited.”

Banks, industrials and mining stocks were down between 0.1% and 0.7% after leading the gains last week when investors piled into sectors that stand to benefit from a steady economic recovery.

Still, banking stocks are among the biggest decliners on the month, behind only the travel index. On the other hand, the healthcare and energy sectors are tracking their fourth and second straight monthly gains, respectively.

All eyes this week will be on June inflation readings as well as business activity data from across the euro zone.

In company news, Burberry Group’s shares tumbled 7.1% to the bottom of the STOXX 600 as Chief Executive Officer Marco Gobbetti resigned to take the top job at Italian luxury group Salvatore Ferragamo. Ferragamo shares rose 0.5%.

(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Shounak Dasgupta and Uttaresh.V)

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