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European shares mark worst day in three weeks on weak earnings, virus risks

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02/20/2020 | 12:37pm EDT
A trader works at Frankfurt's stock exchange in Frankfurt

European shares eased from record highs on Thursday, as a raft of disappointing earnings added to concerns about the global impact of the coronavirus outbreak after research suggested the illness is more contagious than previously thought.

The pan-European STOXX 600 shed 0.9%, deepening losses just before close to post their biggest one-day drop in three weeks.

A near 2% fall in insurance stocks led losses after Swiss Re posted a lower-than-expected annual profit. The reinsurer's shares dropped 8.1% to a five-week low.

A slide in Spain's Telefonica weighed on the Spanish index after the telecoms group said one-off charges in Mexico and Argentina hurt its annual profit..

"Today is more of a bottom up day focused on results," said Ingo Schachel, head of equity research at Commerzbank, Germany.

Meanwhile, France's Schneider Electric rallied to an all-time high after its results beat expectations and the firm said it was confident it could offset the impact of the new coronavirus outbreak in China.

But Paris' main index fell 0.8% as luxury stocks, which derive a chunk of their demand from Chinese customers, fell after a spike in the number of coronavirus cases outside China.

LVMH, Kering and spirits maker Pernod Ricard slid between 2.2% and 3.5%.

New research suggested the virus could spread more easily than previously believed, with South Korea and Iran reporting more cases of infection, while two passengers in a virus-hit cruise ship in Japan died.

European equity investors also await flash readings of the Purchasing Managers' Index (PMI) on manufacturing activity in the euro zone, due on Friday.

"The last few PMIs came in rather weaker and the market is clearly aware that risk bets due to the recent health situation will leave a mark in the PMIs," said Commerzbank's Schachel.

While traders foresee a hit to the Chinese economy from the health crisis, expectations of a pickup in growth from the second quarter have kept equity markets near record highs.

The benchmark STOXX 600 index has bounced back from a slight dip in January and is on course for its best monthly gain in a year.

Among other individual movers, British medical tech firm Smith & Nephew jumped 7.3% as its annual sales topped estimates and it forecast another year of revenue growth. Norwegian technology firm Tomra Systems surged 19% to top the STOXX 600 on strong quarterly results.

Insurer AXA fell 3.5% as it lowered 2020 profit guidance for its companies-focused XL unit, while medical equipment maker Elekta AB slid after its quarterly operating profit undershot expectations.

The auto index was the sole sectoral gainer in Europe with Renault up 3% while Daimler rose 2.3% after saying it would slim down its Mercedes management to remove duplicate layers between Mercedes-Benz and Daimler AG.

By Susan Mathew and Sagarika Jaisinghani

Stocks mentioned in the article
ChangeLast1st jan.
AXA -6.68% 14.734 Real-time Quote.-37.12%
COMMERZBANK AG -6.30% 3.1 Delayed Quote.-40.03%
DAIMLER AG -7.25% 25.525 Delayed Quote.-44.26%
ELEKTA AB -2.07% 80.5 Delayed Quote.-33.36%
EURO / ARGENTINE PESO (EUR/ARS) -0.55% 70.4921 Delayed Quote.5.61%
EURO STOXX 50 -3.83% 2680.3 Delayed Quote.-27.14%
KERING -4.39% 455 Real-time Quote.-18.68%
LVMH MOËT HENNESSY - LOUIS VUITTON SE -4.08% 324.65 Real-time Quote.-18.29%
PERNOD RICARD -0.66% 128.6 Real-time Quote.-18.79%
RENAULT -7.88% 16.312 Real-time Quote.-58.02%
SCHNEIDER ELECTRIC SE -6.41% 73.54 Real-time Quote.-14.12%
SMITH & NEPHEW PLC -3.56% 1394.5 Delayed Quote.-21.72%
STOXX EUROPE 600 -2.90% 310.77 Delayed Quote.-25.24%
STOXX EUROPE 600 NR -2.89% 674.84 Delayed Quote.-24.81%
SWISS RE -6.68% 69.58 Delayed Quote.-31.41%
TELEFÓNICA, S.A. 0.86% 4.1735 End-of-day quote.-32.98%
TOMRA SYSTEMS -1.17% 288 Delayed Quote.4.67%
US DOLLAR / ARGENTINE PESO (USD/ARS) 0.33% 64.499 Delayed Quote.7.37%
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