European shares Wednesday wiped out what was left of the sharp gains made since late October, extending the rout into a fifth day as the COVID-19 virus spread in the region and companies from Diageo to Danone warned the outbreak will hit sales.
The Stoxx Europe 600 Index tumbled as much as 2.9%, extending its weekly drop to 8.2% — the biggest slump since the heat of the eurozone's sovereign-debt crisis in August 2011 — before trimming losses. The benchmark was down 0.9% as of 11:56 a.m. in London.
"Investors don't like unpredictable things and the virus is very unpredictable," Raphael Pitoun, an equities fund manager at CQS, said by phone. "If the virus doesn't stop and there are new epicenters emerging that are critical to the world economy, I don't think anyone is going to say that this was a healthy market correction."
Italy reported 19 more cases of COVID-19 from the Lombardy region Wednesday, France reported three new cases including a 60-year-old French man who died overnight in a Paris hospital, while 700 people were still confined to a hotel in Tenerife. The spread of the virus outside of China in the past week has revived worries over the potential impact on economic growth corporate earnings.
"The coronavirus outbreak is challenging as it is both a supply side and a demand side shock," said Mark Phelps, chief investment officer of global concentrated equities at AllianceBernstein in London. "Clearly China is much more integrated into the global economy that during previous outbreaks, particularly in Europe. This means the virus is likely to have a greater impact on Europe than the U.S."
Travel stocks plunged again Wednesday, with Ryanair Holdings falling 4.4% and InterContinental Hotels Group dropping 2.3%. The Stoxx travel and leisure index has tumbled 12% since Feb. 19, the most among industry groups.
"The point here is that the market has just realized that the EU is not ready to contain the infection," Alberto Tocchio, chief investment officer at Colombo Wealth in Lugano, Switzerland.