World News

Fears over China coronavirus wallop European shares

By Ambar Warrick

(Reuters) – European shares fell for a fourth straight session on Thursday as worries over the spread of a new coronavirus in China created uncertainty over the potential economic fallout.

The pan-European STOXX 600 <.STOXX> index dropped 0.7%, its worst session so far this year, with China-exposed mining stocks as well as airlines, hotels and luxury goods makers posting steep losses.

Euro zone banks <.SX7E> also fell about 0.5% after European Central Bank President Christine Lagarde struck a slightly more dovish tone than some had expected in the bank’s first policy meeting of the year. The bank kept rates steady and launched a strategic policy review.

The coronavirus outbreak has killed 18 people and infected more than 630. China, one of the euro zone’s biggest trading partners, has put millions of people on lockdown in two cities at the epicentre of the outbreak.

Concerns over the virus affecting industrial production in China undercut major European resource exporters, with the basic resources sub-index <.SXPP> enduring its worst day in more than three months.

However, analysts have raised doubts over the long-term economic impact of the virus, citing a quick bounce-back in markets after fears over the SARS epidemic in 2003 had initially spurred a sell-off.

“It’s certainly causing elevated concerns at the moment,” said Brian Beitner, managing partner at Chautauqua Capital Management. “At this point, we do not anticipate that the coronavirus will be as devastating as SARS was.”

Haicheng Li, a partner at Chautauqua, added: “The country has learnt a lesson from previous times, and they have adopted pretty drastic measures (to address the virus).”

Travel and leisure stocks <.SXTP> hit their lowest since mid-December as the virus threatened to cause disruption ahead of a big Chinese holiday, the Lunar New Year.

Auto stocks <.SXAP> hit fresh three-month lows after U.S. President Donald Trump threatened to impose high tariffs on imports of cars from the European Union if the bloc did not agree to a trade deal.

Bucking the trend, shares of Danish enzymes maker Novozymes <NZYMb.CO> and Apple-supplier STMicroelectronics <STM.PA> led gains on the STOXX 600 after clocking strong quarterly results.

Utility stocks <.SX6P> also benefited from some defensive buying.

Meanwhile, the euro fell and German bond yields dropped after the ECB meeting.

(Reporting by Ambar Warrick and Medha Singh in Bengaluru; Editing by Anil D’Silva and Pravin Char)