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European Stocks Erase Rebound in the Biggest Reversal on Record

European stocks on Tuesday erased the recovery from yesterday’s worst selloff since 2008. 

European Stocks Erase Rebound in the Biggest Reversal on Record
Financial Traders Monitor Data on Computer Screens (Photographer: Krisztian Bocsi/Bloomberg)

(Bloomberg) -- European stocks on Tuesday erased the recovery from yesterday’s worst selloff since 2008 as early optimism faded about measures to contain the coronavirus outbreak and provide economic stimulus to counter its impact.

The Stoxx Europe 600 Index fell 1.1% by the close to the lowest level since January 2019, wiping out gains of as much as 4.1%. That turnaround was the biggest intraday reversal on record for the benchmark, according to data compiled by Bloomberg. Gains in miners and oil companies were offset by losses in utilities, real-estate and telecom shares.

Europe is struggling to find a unified response to the new coronavirus as Italy announced a nationwide lockdown. Several European equity benchmarks, including the Stoxx 600, fell into a bear market on Monday as an oil-price war added to market jitters about the spreading virus.

European Stocks Erase Rebound in the Biggest Reversal on Record

“We continue to be very cautious towards equities,” said Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management. “Equity markets are moving fast, but at these levels we still think the market is too sanguine about the spread of the virus and the economic impact.”

President Donald Trump’s plan to announce “substantial” economic measures on Tuesday to combat the fallout from the coronavirus initially supported equities but the White House has yet to provide any details.

The Stoxx 600 Oil & Gas Index erased a gain of as much as 8.7% to trade up 0.8% after Brent oil pared its advance. Oil rebounded from its worst loss since 1991 on speculation that potential U.S. tax cuts may shield the market against the coronavirus and a price feud between major producers.

A report that Germany’s banking watchdogs are debating relief for lenders briefly supported the rally, though the advance faltered as U.S. markets trimmed gains. The European Central Bank’s Governing Council’s two-day meeting starts Wednesday and is being closely watched by investors for a response to the outbreak.

“The market is very nervous and it looks like it’s pushing for more clear measures,” Tomas Garcia, a portfolio manager at Andorra-based MoraBanc Asset Management, said by phone. “It’s surprising that the ECB hasn’t moved yet and announced specific steps. It seems we will have to wait until Thursday for that.”

--With assistance from Jan-Patrick Barnert, Luke Kawa and Macarena Munoz.

To contact the reporters on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net;Jan-Patrick Barnert in Frankfurt at jbarnert3@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Phil Serafino

©2020 Bloomberg L.P.