Europe: Shares back in red as virus fears persist; miners lead losses

[BENGALURU] European shares snapped a three-day gaining streak on Thursday as concerns over the scale of economic damage caused by the coronavirus outbreak overtook optimism over support from monetary stimulus.

Resources was the worst performing sector as several heavyweight miners, including BHP Group and Rio Tinto, traded ex-dividend. The two stocks lost about 6 per cent and 7 per cent for the day, respectively.

The main European equity benchmark ended 1.4 per cent lower after the death toll from the outbreak rose to more than 3,300, with several more companies providing profit warnings because of disruptions caused by the coronavirus.

Hopes of stimulus from several major central banks to stymie the impact of the outbreak had stabilised the index this week, but questions had remained about whether central banks would be able to completely shelter big economies.

Analysts firmly expect the European Central Bank to cut interest rates by 10 basis points next week.

"At 10 basis points, an interest rate cut hardly does anything to the economy. It's more of a signal to the market that the ECB is ready to act and also, it will likely be accompanied by a message that they're looking into more targeted measures," said Elwin de Groot, head of Macro Strategy at Rabobank in Amsterdam.

Travel and leisure stocks dropped 2.9 per cent, with the sector ranking among the worst hit by the virus.

Airline stocks plunged after British regional airline Flybe collapsed, making the struggling carrier the industry's first big casualty of the outbreak.

British commercial broadcaster ITV fell 12 per cent after warning that ad revenue for April could fall by about 10 per cent as travel companies put back campaigns.

German auto supplier Continental slumped 12.4 per cent after it posted a net loss of 1.2 billion euros (S$1.85 billion) in 2019, with the broader automakers index dropping 3.4 per cent in tow.

Heavyweight bank HSBC dropped 1.2 per cent after it sent more than 100 of its London staff home after a worker tested positive for the coronavirus.

Broader bank stocks retreated in the face of steadily dropping bond yields

Ratings agency Fitch said on Thursday the spread of the coronavirus in the EU opens new channels for it to affect the regional economy and heightens its adverse impact on GDP growth.

Rabobank's Elwin said the EU would probably have two quarters of zero-to-negative growth, with some countries showing negative growth in 2020.

Among stocks in the black was German food delivery firm Hellofresh, which was one of the top gainers on the Stoxx 600 after JPMorgan upgraded the stock.

REUTERS