European stocks fall on virus fears

Bloomberg

European equities haven’t had such a bad day in more than three years as increasing concerns over the economic impact of the coronavirus hurt travel and luxury sectors.
The Stoxx Europe 600 Index fell as much as 3.6%, the most since June 2016, led by the auto, mining and travel sectors. Luxury companies tumbled on fears that the epidemic will hurt sales, with LVMH Moet Hennessy Louis Vuitton SE losing as much as 7.2% and Roche Holding AG dropping 2.3%.
Travel shares and especially airlines were also having a bad day. The Stoxx 600 Travel and Leisure Index dropped the most since June 2016, with Air France-KLM declining as much as 9.5%, EasyJet Plc falling 14% and Ryanair Holdings Plc dropping 11%.
“We believe the coronavirus illness will substantially curtail store traffic in China and neighbouring 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 on Monday.
Money managers are selling stocks and looking for havens after South Korea saw a surge in cases to 763 and the concern about a surge in illnesses in Italy intensified.
European equities jumped 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 favours quality European stocks.
“Given the strong performance and elevated positioning in equities, the risks
are clearly skewed to the downside.”
The impact from China’s slowdown due to the coronavirus as well as supply, sales and production disruptions at such major firms such as Apple Inc, are a major concern for asset managers.
European equities are particularly sensitive as Goldman Sachs Group Inc says the exposure of the Euro Stoxx 50 Index to China is about twice that of the S&P 500 due to such sectors
as banks, automakers and luxury shares.