UPDATE 2-Travel stocks drag Europe lower after UK's quarantine move on Spain

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* European travel & leisure index sinks to 2-month low
* Ryanair cuts annual passenger target by quarter
* SAP shares jump on plans to spin off Qualtrics
* German business morale brightens further in July - Ifo

(Updates to market close)
By Sruthi Shankar
July 27 (Reuters) - European shares slipped on Monday with
travel stocks leading the declines after Britain imposed a
two-week quarantine on travellers returning from Spain after a
surge in coronavirus cases.
The pan-European STOXX 600 .STOXX closed down 0.3%,
extending declines after it recorded its first weekly fall in
four on Friday.
Travel and leisure stocks .SXTP dropped 3.4%, with
UK-based airlines and tour operators such as TUI TUIGn.DE
TUIT.L , Easyjet EZL.L , British Airways-owner IAG ICAG.L
falling between 6% and 11.3%. The broader index sank to a two-month low, further cementing
its status as the worst performer in Europe this year with a 40%
loss. Adding to the sector's woes, Ireland's Ryanair RYA.I cut
its annual passenger target by a quarter and warned a second
wave of COVID-19 infections could lower that further.
Lufthansa LHAG.DE and Air France AIRF.PA dropped about
5% each after the British government said it was watching the
situation in Germany and France closely. Spanish stocks .IBEX fell 1.7%, lagging its European
peers, also hit by a weakness in banking shares.
"There's always been this concern when lockdown measures
were released that we would have a resurgence in cases and
reimposition of social restrictions," said Alastair George, head
strategist at Edison Investment Research.
"It does not just impact people going on holidays as the
risk is economies have to shut down again. But that has not
happened, which is why you have a measured response to the news
over the weekend."
Germany's DAX .GDAXI stayed afloat, helped by a 2.7% gain
for software giant SAP SE SAPG.DE after it announced plans to
spin off and float Qualtrics, the U.S. specialist in measuring
online customer sentiment. Still, concerns over a resurgence in coronaviurs cases
overshadowed an Ifo Institute survey that showed German business
morale improved further in July after posting a record increase
in June. Investors globally were on edge as ties between the world's
two largest economies deteriorated after China took over the
premises of the U.S. consulate in the southwestern city of
Chengdu in retaliation for China's ouster last week from its
consulate in Houston, Texas. French car parts group Faurecia EPED.PA fell 6.4% after
saying that it expects to return to profit and cash generation
in the second half of the year, helped by cost controls.
Ubi Banca UBI.MI fell 8.8%, while Intesa Sanpaolo
ISP.MI slipped 0.8% after the expiry of a deadline for
investors to buy Ubi Banca's shares and tender them in Intesa
Sanpaolo's takeover offer, the day before the formal end of the
offer.