By Sruthi Shankar
(Reuters) – 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 <.STOXX> 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. [MKTS/GLOB]
All European sub-sectors were well in the red, with miners <.SXPP>, travel and leisure stocks <.SXTP>, technology <.SX8P> and chemical companies <.SX4P> down between 4.3% and 5%.
In the latest evidence of damage from the outbreak, British Airways owner IAG
“The real difficulty here is that it will take time to resolve and it will definitely have an impact on the global economy,” said Alexandre Deruaz, head of portfolio construction for equities at Unigestion in Geneva, Switzerland.
“The question is: will growth turn negative or not globally? If the trend sustains, you’ll see recession in some specific countries (and) Italy will be a candidate.”
Milan-listed shares <.FTMIB> fell 3.6% as the number of people infected in Italy, Europe’s worst hit country, surpassed 650.
German stocks <.GDAXI> dropped 4% after the country warned of an imminent epidemic, with heavyweights Linde Plc
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.
Aerospace engineer Rolls-Royce
(Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila and Emelia Sithole-Matarise)