European Stocks Pare Losses After Four-Day Rout Amid Virus Risk
European Stocks Drop With Travel Shares on Spreading Virus Woes
(Bloomberg) -- European shares closed flat on Wednesday following a roller-coaster session, trimming an earlier sharp slide fueled by worries about the spread of the coronavirus outside of China.
The Stoxx Europe 600 Index ended the day little changed as a rise in carmakers and utilities tempered losses in travel shares, and as U.S. stocks rallied. The European benchmark earlier tumbled as much as 2.9%, at one point wiping out all the gains made since late October.
European equities slumped in the past four sessions as the spread of the virus outside of China revived worries over the potential impact on economic growth and corporate earnings. Just last week, the Stoxx 600 index had jumped to a fresh record high, making it vulnerable to sudden negative news.
“European indices have a higher sensitivity to global growth,” said Edward Park, deputy chief investment officer at Brooks Macdonald Asset Management. “The Italian outbreak makes the virus a local issue and there are concerns over whether European fiscal stimulus will be forthcoming.”
The sell-off in the Stoxx 600 wiped out as much as $1.2 trillion in market capitalization versus the record high the benchmark hit on Feb. 19.
Italy reported more infections from the Lombardy region on Wednesday, while guests were still confined to a hotel in Tenerife and Greece reported its first case.
Greece’s ASE Index slid 2.7%, on track for the worst performance among global equity benchmarks in February. Italy’s FTSE MIB Index halted a sharp four-day slump and rose 1.4%, led by Enel SpA and Fiat Chrysler Automobiles N.V.
“The coronavirus outbreak is challenging as it is both a supply side and a demand side shock,” said Mark Phelps, chief investment officer of global concentrated equities at AllianceBernstein in London. “Clearly China is much more integrated into the global economy that during previous outbreaks, particularly in Europe. This means the virus is likely to have a greater impact on Europe than the U.S.”
Most Stoxx 600 industry groups were still in the red on Wednesday. Carmakers were up 1.3%, buoyed by PSA Group as the Peugeot maker rallied after raising its dividend and offering assurances to investors it can withstand a deepening slump.
Iberdrola SA rallied 5.1% after saying it expects sharp growth in profit this year, driven by rising power output after earlier investments in renewable energy and transmission assets ramped up.
Travel stocks plunged the most, with Ryanair Holdings Plc and InterContinental Hotels Group Plc dropping 1.8% and 1.1% respectively. The Stoxx 600 Travel & Leisure Index has tumbled 10% since Feb. 19, the most among industry groups.
“Investors don’t like unpredictable things and the virus is very unpredictable,” Raphael Pitoun, an equities fund manager at CQS, said by phone. “If the virus doesn’t stop and there are new epicenters emerging that are critical to the world economy, I don’t think anyone is going to say that this was a healthy market correction.”
--With assistance from Filipe Pacheco and Anooja Debnath.
To contact the reporters on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.net;Namitha Jagadeesh in London at njagadeesh@bloomberg.net
To contact the editor responsible for this story: Blaise Robinson at brobinson58@bloomberg.net
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