By Ambar Warrick and Sruthi Shankar
(Reuters) – European shares plummeted on Friday amid widespread fears of the coronavirus hampering business activity, with oil and gas stocks bearing the brunt of losses after steep declines in crude prices.
The pan-European STOXX 600 <.STOXX> closed 3.7% down to its weakest point since mid-August 2019, ending red for the third straight week after global coronavirus cases surpassed 100,000, with the economic damage deepening as more countries imposed restrictions to curb its spread.
While the STOXX 600 had briefly gained this week following an emergency rate cut by the U.S. Federal Reserve, concerns over the virus’ impact swiftly shunted markets lower.
“The issue that people have in situations like this is that it’s very difficult to know when the bottom’s going to arrive,” said Craig Erlam, Senior Market Analyst at Oanda in London.
“The worst is not yet behind us because it still feels like we’re in the early spread phase in many countries. If we’re seeing policymakers providing stimulus, it suggests that even they believe there could be some significant damage.”
Oil and gas stocks <.SXEP> ended more than 5% lower for the day, seeing their worst day in more than three years as oil prices plunged to their lowest since 2017 after Russia rejected a steep OPEC output cut. Crude prices were already pressured by concerns over waning global demand. [O/R]
London-listed Tullow Oil PLC <TLW.L> was the worst performer on the subindex, losing about 15%.
The banks index <.SX7P> underperformed its peers for the week, shedding about 8.8%. The index touched its lowest point since 2009 amid a flurry of virus-related disruptions and sinking bond yields.
Deutsche Bank <DBKGn.DE> fell 3.8% and Commerzbank <CBKG.DE> slid 7.2% as the flight to safety pushed Germany’s benchmark 10-year Bund yield to record lows. [GVD/EUR]
Planemaker Airbus <AIR.PA> dived 7.6% as it failed to win any new aircraft orders in February – further evidence of disruption across aviation industries due to the spread of coronavirus.
Several regional subindexes were trading in bear market territory.
Investors have almost fully priced in a 10 basis points cut by the European Central Bank next week. However, a recent Reuters poll of economists showed the ECB will not cut rates, underscoring the central bank’s limited policy options, given its deposit rate is already at a negative 0.50%.
Infineon Technologies AG <IFXGn.DE> fell 5.5% after reports that U.S. officials recommended blocking the German chipmaker’ s proposed $10 billion deal to buy Cypress Semiconductor Corp <CY.O> on security risks.
Among the few gainers, carmaker Continental AG <CONG.DE> and airline Air France <AIRF.PA> both marked modest gains for the day as they recovered from multi-year lows.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila)