European mood turns grim on profit warnings, London stock slide

By Sruthi Shankar

(Reuters) – European shares headed lower on Thursday, as a slump in British stocks and profit warnings from several companies soured market sentiment even after central banks this week tried to ease the blow of the coronavirus outbreak on global growth.

The main European equity benchmark <.STOXX> reversed early gains to trade down 0.8%.

London’s FTSE 100 <.FTSE> fell 1.3%, with several companies including Evraz Plc Rio Tinto , Persimmon and BHP sliding as they traded ex-dividend. [.L]

Among euro zone stocks, German auto supplier Continental slumped 10.5% after it posted a net loss of 1.2 billion euros ($1.34 billion) in 2019, as it suffered from a global downturn in demand for passenger cars.

The broader automakers index <.SXAP> dropped 2.2%, while miners <.SXPP> fell 2.8%, leading declines among the STOXX 600 subsectors.

Airbus shares fell 2.8% after Bloomberg reported the company was considering a cut in production of the A330neo jet after its biggest customer deferred deliveries due to a slump in travel demand.

In a sign of deep damage to the travel industry, British regional airline Flybe collapsed, making the struggling carrier the industry’s first big casualty of the outbreak.

Following late February’s rout that pushed European markets into correction territory, markets stabilised somewhat this week as investors were hopeful stimulus measures from governments and central banks would protect the global economy.

Analysts firmly expect the European Central Bank to cut interest rates by 10 basis points next week, joining the U.S. Federal Reserve and its peers in Canada and Australia in reducing borrowing costs.

“The Fed has some room to ease further, but Europe doesn’t have a lot of room,” said Artur Baluszynski, head of research at Henderson Rowe.

“If we see a round of disappointing earnings or outlooks this earnings season, we might see markets moving from the narrative of ‘we need easy money’ to ‘we need some serious fiscal stimulus'”.

The outbreak shows little signs of peaking globally, with Italy closing all schools and California declaring a state of emergency.

Ratings agency S&P Global halved its eurozone growth forecast for the year to 0.5% from 1% on Wednesday and predicted a 0.3% contraction for hard hit Italy.

British commercial broadcaster ITV fell 9.0% after warning that ad revenue for April could fall by about 10% as travel companies deferred campaigns.

German broadcaster ProSiebenSat.1 Media dropped 10.5% after saying its e-commerce arm NuCom would buy U.S. dating app developer Meet Group Inc .

Among stocks in the black was science and technology company Merck KGaA , rising 2.8% after it forecast “strong” growth core earnings for 2020.

(Reporting by Sruthi Shankar in Bengaluru; editing by Patrick Graham and Bernard Orr)