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Europe: SAP drags down German shares, Covid-19 worries weigh on stocks

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German shares closed at their lowest in nearly four months on Monday as Europe's most valuable tech firm, SAP, experienced its worst trading day in 24 years after cutting its 2020 outlook.

[BENGALURU] German shares closed at their lowest in nearly four months on Monday as Europe's most valuable tech firm, SAP, experienced its worst trading day in 24 years after cutting its 2020 outlook.

The German DAX fell 3.7 per cent as SAP slumped almost 22 per cent after abandoning medium-term profitability targets and cautioning that its business would take longer than expected to recover from the pandemic hit.

"SAP's pessimism does not bode well for hopes for the global economic recovery to continue," said Edward Moya, senior market analyst at Oanda, New York.

"If tech goes, the deteriorating outlook due to virus spread will likely yield massive risk aversion as investors head for the sidelines instead of rotating into cyclicals."

The wider European tech index slid 7.4 per cent.

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SAP's results came as a blip in the third-quarter earnings season, which has been largely better than feared.

Meanwhile, fresh Covid-19-induced restrictions in Italy and Spain to curb a resurgence in cases weighed on the rest of Europe, with the pan-European Stoxx 600 index closing at a one-month low, down 1.8 per cent.

Europe on Saturday became the second region after Latin America to surpass 250,000 deaths, according to a Reuters tally.

The euro zone blue-chip index fell nearly 3 per cent, while Europe's travel and leisure sector, worst hit by the movement curbs, was down 3.3 per cent.

Nick Nelson, head of European equity strategy at UBS, said the Swiss bank's target for Stoxx 600 into the year-end is 340 points, about 4.5 per cent below the current level, in part due to the impact of the latest round of restrictions.

Surveys of euro zone purchasing managers last week showed economic activity slipped back into decline in October, heightening expectations for a double-dip recession as a second wave of virus sweeps across the continent.

Globally, risk appetite was sapped by worries over slow progress on a new US stimulus bill and a looming presidential election.

Milan's blue-chip index fell 1.8 per cent even as ratings agency Standard and Poor's upgraded Italy's sovereign outlook to stable from negative.

Oil majors Total and Royal Dutch Shell fell over 2.8 per cent as crude prices slumped more than 3 per cent on demand worries.

Healthcare stocks remained supportive, with AstraZeneca gaining 1.7 per cent after it resumed the US trial of its experimental Covid-19 vaccine.

French stocks dipped 1.9 per cent. Turkish leader Tayyip Erdogan asked his compatriots to stop buying French goods on Monday in the latest expression of anger in the Muslim world over images being displayed in France of the Prophet Mohammad, which some Muslims consider blasphemous.

REUTERS

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