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European equities tumbled the most since December 2018 as investors fled travel and luxury shares amid rising concern about the economic impact of the spreading coronavirus.
The Stoxx Europe 600 Index fell as much as 3.1%, led by the auto, mining and travel sectors. LVMH Moet Hennessy Louis Vuitton SE lost 4.8%. The Stoxx 600 Travel and Leisure Index dropped the most since June 2016, with Air France-KLM declining as much as 9.5% and EasyJet Plc falling 13%. Almirall SA lost as much as 9.8% after predicting a drop in earnings for 2020.
“We believe the coronavirus illness will substantially curtail store traffic in China and neighboring countries, may negatively affect incoming Chinese tourism, and is also likely to disrupt supply chains,” Oliver Chen, a retail analyst at Cowen & Co., wrote in a report.
Italy’s FTSE MIB Index retreated as much as 4.4% after Europe’s biggest surge of the coronavirus prompted the government to impose a lockdown on an area of 50,000 people near Milan, and authorities canceled the remaining days of the Venice Carnival, while universities closed. Some of the biggest Italian companies–from banks to luxury firms–were battered.
Money managers are selling stocks and looking for havens after South Korea saw a surge in cases to 763 and the concern in Italy intensified. European equities surged to a fresh record high last week, which is adding to investor anxiety about possibly stretched positioning and valuations.
“Markets are in a risk-off mode amid concerns about the global spread of coronavirus, with a growing number of infections outside of China,” said Ulrich Urbahn, head of multi-asset strategy and research at Joh Berenberg Gossler & Co., which recently cut its exposure to commodities and favors quality European stocks. “Given the strong performance and elevated positioning in equities, the risks are clearly skewed to the downside.”
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