(C) Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt
By Sruthi Shankar
(Reuters) – European shares edged lower on Tuesday after recording their worst losses since June 2016 in the previous session, with trading still dominated by concern that the coronavirus outbreak is spreading fast outside China.
After opening up about 0.4%, the pan-European STOXX 600 (STOXX) shed those gains more than hour into trading to trade down 0.3%.
Banking shares (SX7P) were among the biggest drags, while automakers (SXAP) dropped 1.2% as investors worried Europe’s trade-reliant economy would take a bigger toll from the outbreak than previously thought.
German car parts maker Leoni (D:LEOGn) slumped 8% after reporting lower-than-expected core profits, while UK engineering firm Meggitt (L:MGGT) slid 3% after warning it would be hurt by the virus and Boeing’s 737 MAX problems.
Traders knocked about $500 billion off the value of European companies on Monday after Italy unveiled it was struggling with the worst flare-up of coronavirus cases in Europe, reporting 220 cases and seven dead.
“Losing all 2020’s gains in one session was a dramatic way to do it but yesterday’s resetting of equity valuations was overdue,” said Ian Williams (NYSE:WMB), economics and strategy analyst at Peel Hunt. “They now more accurately reflect the downside threat to corporate earnings from the coronavirus.”
Washington and Beijing’s “phase one” trade deal in December and continuing low interest rates have propelled the STOXX 600 to a record high, but the virus outbreak has forced economists to cut expectations for growth amid disruptions to businesses and travel.
Euro zone data on Tuesday was also underwhelming, with figures showing German economic activity stagnated in the fourth quarter due to shrinking exports.
Norwegian fish farmer Bakkafrost (OL:BAKKA) fell the most on the index after disappointing fourth-quarter earnings.
Among the few bright spots was Prudential Plc (L:PRU), which gained 1.9% after hedge fund Third Point LLC said it had amassed a more than $2 billion stake and called on the British insurer to split into two companies.
Early gains fade for European shares as virus fears weigh
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