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European Stocks Come Closer to Correction as Virus Cases Mount

Published 02/27/2020, 03:13 AM
Updated 02/27/2020, 04:17 AM
© Reuters.  European Stocks Come Closer to Correction as Virus Cases Mount

© Reuters. European Stocks Come Closer to Correction as Virus Cases Mount

(Bloomberg) -- The sell-off ripping through European equity markets intensified on Thursday as the cases of coronavirus outside China continued to rise.

The region’s benchmark is nearing a correction, with the Stoxx Europe 600 Index now down 8.9% since last week’s record high. The measure slid 2.3% as of 8:12 a.m. in London, with basic resources and travel and leisure industry groups lower, after the U.S. reported its first case of coronavirus that doesn’t have ties to a known outbreak.

Equities are plunging as the spread of the epidemic fuels fears about the impact on global growth and corporate earnings. More coronavirus cases were reported in countries other than China for the first time, the World Health Organization said.

“Given the recent volatility, fear is the dominant factor,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM EK. “In a very short period, we went from all-time high celebrations to panic mode. It’s too early to ‘buy the dip’ in my view and I expect investors to stay on the sidelines or increase cash.”

European equities have now wiped out all the sharp gains made since late October. The Stoxx 600 is on track for its worst week since August 2011. Stocks in Italy, the heart of the outbreak in Europe, fell 2.2% on Thursday. Greek stocks, last year’s big winners, are heading for one of the worst performances among global equity benchmarks this month.

Travel stocks tumbled yet again, down 3.3%. The sector has plunged the most among industry groups since Feb. 19.

Anheuser Busch Inbev NV (NYSE:BUD)joined the chorus of companies warning about the impact of the epidemic, with the world’s largest brewer forecasting the steepest decline in quarterly profit in at least a decade due to the coronavirus. Its shares fell 5%.

“Investors should minimize their exposure to industrial commodities, luxury goods and European airlines,” said Seema Shah, chief strategist at Principal Global Investors. “We also favor quality stocks, especially large companies. “Defensive sectors such as utilities, real estate and health care are likely to do well in the equity markets compared to the broader markets.”

Seven companies including AstraZeneca Plc (NYSE:AZN), Barclays Plc (NYSE:BCS) and HSBC Holdings Plc (LON:HSBA) traded without the right to dividends today, shaving about 0.4 point off the Stoxx 600 and almost 28 points off the FTSE 100 Index.

Latest comments

"..fear is the dominant factor,” said Guillermo Hernandez Sampere, head of trading at asset manager MPPM EK. “In a very short period, we went from all-time high celebrations to panic mode..". IMO that's the main lesson from this hype here: an exercise in hyping the flames to scare people from one country to the next and report about what amounts to regular every season type common flu effects that happen coincidentally due to one virus that mutates and hits people with pre-existing conditions just like the common flu does, just while politicians are watching and wanting to do something about it so they get reelected .. with the unfortunate fall-out that people become aware and stop spending
It takes the covid19 for COMMON SENSE guidelines to be distributed by the gov't to the public to protect against the common flu that ki'lls more people per year than covid19. Maybe the intervention now by gov't to finally give us decent guidelines is something that will help us ward off the common flu about which the population didn't receive any widespread info from the gov't. We were always at the mercy of big pharma. I dunno why this covid19 is played out so much bigger than the annual flu season that kil'ls so many more people? Just wash your hands PROPERLY, EAT CLEAN FOODS, STAY WELL HYDRATED with clear liquids, stay away from food after 6 pm dinner, fast like going for your annual sugar test, practice stretching and breathing techniques, drink herbal teas, go for a fresh air walk daily, consider yourself a patient and hit the horizontal position in your bed before midnight and develop a regular 7-hour sleeping routine .. SAME GUIDELINES AS FOR FIXING THE COMMON FLU. Good Luck2you
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