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Travel and auto stocks lead Europe lower amid virus fears – Metro US

Travel and auto stocks lead Europe lower amid virus fears

The German share price index DAX graph is pictured at
The German share price index DAX graph is pictured at the stock exchange in Frankfurt

(Reuters) – Travel stocks, automakers and banks led a slide in European shares on Wednesday as fears of a resurgence in coronavirus cases and a worrying outlook from the U.S. central bank chief dented hopes of a swift economic recovery.

The pan-European STOXX index fell 1.9% to hit a one-week low, with losses deepening after U.S. Federal Reserve Chair Jerome Powell warned of an “extended period” of weak growth and stagnant incomes due to the health crisis.

Europe’s hard-hit travel & leisure index and auto stocks fell 5% each, while banking shares slid 3.7%.

A batch of weak earnings reports added to the gloom.

Shares in Germany’s Commerzbank fell 7.1% and Dutch bank ABN Amro dropped 9.1% after swinging to a loss in the first quarter as the pandemic drove up loan loss provisions.

Deutsche Bank sank 6.4% on news that top managers will waive one month of fixed pay in an effort to cut costs.

UK-based luxury carmaker Aston Martin plummeted 16% as it posted a deep first-quarter loss after sales dropped by nearly a third due to the impact of the coronavirus crisis.

European shares have reversed some of the strong recovery gains made in April, as South Korea, Germany and China reported a rise in infections after easing their restrictions and a top U.S. health expert warned against easing lockdowns too soon.

“The correction could continue for a few weeks,” said Simona Gambarini, markets economist at Capital Economics. “There are worries about easing of lockdowns being premature in certain countries, a second wave of contagion, weak economic data and tensions between the U.S. and China.”

A leading U.S. Republican senator on Tuesday proposed legislation that would authorize President Donald Trump to impose sanctions on China if it fails to give a full account of events leading to the outbreak of the coronavirus.

Sensor producer AMS slumped 8.7% after saying that it planned another capital increase to finance the takeover of Osram.

Shares in Exor, the holding firm of Italy’s Agnelli family, fell 7.2% after French insurer Covea walked away from its planned $9 billion purchase of PartnerRe, the Bermuda-based reinsurer owned by Exor.

Earnings expectations are deteriorating sharply in Europe, with companies listed on the STOXX 600 now expected to report a collective drop of 46.7% in earnings in the second quarter, down from a fall of 44.9% forecast the week before.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Bernard Orr and Pravin Char)