Europe: Pandemic fears pummel stocks into correction territory

[BENGALURU] European stocks marked their weakest close in more than four months on Thursday, sinking into correction territory as a jump in coronavirus cases outside China deepened fears of an economically damaging pandemic.

Investors typically consider a correction in a security or index to be a drop of 10 per cent or more from its recent peak.

The pan-European Stoxx 600 index, which retreated 3.8 per cent for the day, has fallen more than 10 per cent from a record high hit on Feb 19.

While strong earnings had caused investors to pause selling on Wednesday, a spike in infections outside China, particularly in Italy, saw markets slip back into red.

"From the unshakeable optimism seen at the beginning of the year, investors have done a complete U-turn switching from excessive optimism to outright pessimism in less than a week," Michael Hewson, chief market analyst at CMC Markets UK, said.

Thursday's sell-off saw more than 97 per cent of the pan-European Stoxx 600 index's constituents trading red, with basic resources stocks among the worst performers as commodity prices plunged amid fears of sustained disruptions in the global supply chain.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

"The sell-off in the base metals complex over the last few days largely reflects the heightened risk-off sentiment or 'fear-factor' across broader riskier assets," Wenyu Yao, senior commodities strategist at ING wrote in a note.

London-listed miner Evraz Plc was the worst performing stock in the sector after it posted weak 2019 earnings.

Travel stocks also plummeted, with casino operator Evolution Gaming Group leading declines. The sector has shed nearly 15 per cent this week, underperforming its peers by a wide margin.

Standard Chartered fell 3.5 per cent after the bank said a key earnings target would take longer to meet as the epidemic adds to headwinds in China and Hong Kong. The broader bank sector was also pressured by a drop in bond yields.

The world's largest beer maker, Anheuser-Busch InBev, plunged nearly 11 per cent after it forecast muted growth in 2020, due in part to the outbreak.

Advertising major WPP tumbled 16 per cent, marking its worst day since August 1992, after saying it would target flat organic growth and profit margins in 2020. The stock was the worst performer on the Stoxx 600.

Italian shares, which entered correction territory on Wednesday, fell 2.7 per cent as the country reported another 100 coronavirus cases nationwide, taking the total to more than 400.

In a sole bright spot, Hikma Pharmaceuticals rose 4.6 per cent, topping the Stoxx 600 after it beat expectations with its annual earnings.

REUTERS