Europe close: Stocks sent reeling as coronavirus spreads
By Alexander Bueso
Date: Monday 27 Jan 2020
(Sharecast News) - European shares got slammed by news that the Chinese coronavirus had in fact spread further over the weekend, although other factors including so-called 'overbought' conditions in stocks and the impeachment hearings in the US also weighed on prices.
As of Monday, and according to China's National Health Commission, the death toll had risen to 80 persons, with 2,744 confirmed cases and over 30,000 patients under observation.
During the 2003 SARS epidemic, which lasted for six months, 8,000 cases were reported and 774 people died.
"The viral outbreak in China is precisely the kind of unforeseen event to generate heightened volatility, the market having shrugged off the US-China trade war and impeachment drama of late," said IG analyst Chris Beauchamp.
"Investors would be wise to anticipate further bad news on the virus, with infection tolls likely to rise, while any treatment is weeks away at the earliest."
By the end of trading, the pan-European Stoxx 600 had shed 2.26% at 414.07, while the German Dax fell 2.74% to 13,204.77 together with a 2.68% drop for the French Cac-40 to 5,863.02.
Basic Resources shares were impacted the most, due to their sensitivity to the prospect of slower growth in China on the back of travel restrictions, with the Stoxx 600 sector gauge retreating 4.27% and a gauge for the Travel&Leisure sector losing 2.47%, with shares of Amadeus, Air France-KLM, IAG, and Pandora pacing losses.
Nevertheless, analysts at Jefferies said weakness in Metals and Mining could prove to be a "great" buying opportunity in the longer term.
"There would likely be a negative knee-jerk reaction if the Coronavirus escalates in a similar fashion to SARS. However, as we saw in the performance data relating to SARS, the sell-offs offered great buying opportunities," Jefferies said.
Analysts at Morgan Stanley on the other hand expressed an especially cautious view on stocks for over the next week, due to the coronavirus but also because of the possibility of unpleasant surprises out of the impeachment hearings on Capitol Hill or from the US central bank's policy meeting.
Yet Morgan Stanley also broached the possibility that at some point over the next several weeks market sentiment might stabilise.
Crude oil futures were also trading sharply lower, retreating by 2.81% to $59.33 a barrel on the ICE.
Adding to the negative sentiment, reports on Sunday indicated that at least three rockets had hit the US embassy in Baghdad, injuring at least three persons.
The main economic data out at the start of the week was mixed, with the IFO institute's closely-followed business confidence index slumping from a reading of 96.3 for December to 95.9 in January (consensus: 97.0).
Nevertheless, weakness was centred on the construction sector, while in manufacturing, IFO said there were signs of a recovery.
CAC 40 - Fallers
ST Microelectronics (STM) 26.14 -5.77%
L'Oreal (OR) 258.00 -4.62%
Airbus SE (AIR) 132.90 -4.39%
Hermes International (RMS) 680.40 -4.30%
Valeo (FR) 27.42 -3.99%
TECHNIPFMC (FTI) 15.93 -3.83%
Bouygues (EN) 36.68 -3.68%
LVMH (MC) 401.00 -3.68%
ArcelorMittal SA (MT) 13.58 -3.66%
Kering (KER) 552.60 -3.61%
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