Europe: Shares recover from viral outbreak fuelled sell-off

[BENGALURU] Banks and luxury goods led a recovery in European shares on Tuesday after heightened concerns about the about the potential impact on businesses from the coronavirus outbreak in China saw the main index post its worst day in about four months.

Upbeat earnings pushed lender Swedbank to the top of the pan-region Stoxx 600 index, while Virgin Money UK rallied on reporting higher loan book growth.

Marking its best day in almost a month was Italy's lender-heavy index, jumping 2.6 per cent to lead regional peers as its banks index rallied 2.5 per cent.

Luxury goods makers LVMH Burberry Group, Kering and Moncler SpA, which derive a chunk of their demand from China, rose after sliding more than 3 per cent on Monday.

Bolstered also by a recovery on Wall Street, the Stoxx 600 ended up 0.8 per cent. Along with most other major country indices, Stoxx 600 had lost more than 2 per cent on Monday which had wiped out around 200 billion euros of market capitalisation.

Even as the death toll from the outbreak rose to 106, President Xi Jinping said the country was sure of defeating a "devil" virus. In Europe, Germany confirmed its first case of the virus after a 33-year-old man contracted it from a colleague visiting his workplace from Shanghai.

"Yesterday was just panic selling and then today there is this realization that things are getting worse but they don't seem to be getting exponentially worse," said David Madden, a market analyst at CMC Markets UK in London.

But he noted that stock markets have only regained some of the ground they lost on Monday, which could be attributed to traders looking for some short-term bargain hunting and short-covering.

Capping gains were shares of Europe's most valuable technology company SAP, which dropped 2.1 per cent as some analysts pointed to the company's slowing cloud revenue growth.

Philips slipped 2.1 per cent after the Dutch health technology company's quarterly sales fell short of estimates.

As the week progresses, investors anticipate central bank meetings with the Federal Reserve's decision on interest rates due on Wednesday and the Bank of England's policy stance expected on Thursday. Financial markets see a nearly 60 per cent chance of a rate cut in Britain.

Britain is also set to formally leave from the European Union on Friday, followed by a "business as usual" transition that ends next December. The two sides will also start trade talks in the coming days.

REUTERS