European stocks head for worst week since 2008 crisis
European shares slumped on Friday, on course for their biggest weekly decline since the financial crisis in 2008, on investor fears that the rapid spread of the coronavirus outside China could trigger a global recession.
The pan-regional STOXX 600 index fell 4.2%, deepening its slide into correction territory, a 10% decline from its recent peak. The index is currently trading about 14% below its all-time high hit last week, while the wider selloff has seen $5 trillion in value evaporate from global equities.
All European sub-sectors were well in the red, with miners, travel and leisure stocks, technology and chemical companies down between 4.3% and 5%. In the latest evidence of damage from the outbreak, British Airways owner IAG said its earnings would take a hit this year as passenger numbers tumbled.
Germany’s BASF also warned that earnings could drop further this year, sending its shares down about 5%. Milanlisted shares fell 3.6% as the number of people infected in Italy, Europe's worst hit country, surpassed 650. German stocks dropped 4% after the country warned of an imminent epidemic, with heavyweights Linde Plc and SAP SE leading declines. Europe's economic powerhouse has teetered on the edge of a manufacturing recession since 2019.
The World Health Organization warned that the virus had pandemic potential, with ratings agency Moody’s saying it would trigger a global recession in the first half of the year. Adding to the gloom, data showed French consumer spending fell sharply in January, flagging a weak start to the year even before the coronavirus outbreak began taking its toll.
Investors ramped up expectations for a euro zone rate cut as soon as June, with money market futures showing that a 10 basis point rate cut was now fully priced in. Munich Re fell 6% after fourth-quarter profit fell on major losses from natural catastrophes and other claims.
This article was compiled by BOV Asset Management Limited, a member of the BOV Group. BOV Asset Management,TG Complex, Suite 2, Level 3, Brewery Str., Mriehel BKR 3000. Email: infoassetmanagement@bov.com Internet address: www.bovassetmanagement.com. BOV Asset Management is licensed by the MFSA.