February 26, 2020 / 8:49 AM / a month ago

European shares tumble to four-month low as virus risks grow

(Reuters) - European shares fell to a near four-month low on Wednesday, as the fast-spreading coronavirus deepened fears about its impact on global growth with marquee companies sounding the alarm on earnings.

The main European equity benchmark STOXX 600 tumbled 2.6%, marking its first five-day losing streak since July.

Travel stocks, financial services, chemical and technology stocks were among the worst hit, falling between 3% and 4%.

The losses followed a grim session for Asia and Wall Street overnight after U.S. health officials warned Americans should prepare for possible community spread of the virus that has now hit Spain and dozens of countries from South Korea to Italy.

The STOXX 600 is trading 9.4% below the record highs hit just last week, while the past four trading sessions has wiped out about $3 trillion in value of world stocks.

British spirits maker Diageo (DGE.L) fell 3% after estimating an up to 200 million pounds ($260 million) hit to fiscal 2020 profit from the outbreak.

Rivals Remy Cointreau SA (RCOP.PA) and Pernod Ricard (PERP.PA) dropped 4.2% and 2.2%, respectively.

“This is part of the ongoing reassessment of how bad the economic impact could get if the virus were to spread to more countries,” said Simona Gambarini, markets economist at Capital Economics in London.

“Longer the shutdown lasts, then more likely that some of that production might never come back because companies might go bankrupt and people are also starting to take unpaid leaves.”

Food group Danone (DANO.PA) cut its 2020 forecast for sales and profit margin, citing an uncertain economic climate and the coronavirus outbreak. However, its shares rose 1.4%.

Global miner Rio Tinto (RIO.L) fell 1.8% after signaling that the outbreak may create challenging conditions in the next six months.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, February 26, 2020. REUTERS/Staff

Latest data from Refinitiv shows European companies are expected to report a 1.2% fall in profits in the fourth quarter, a bigger drop than previously expected, which would keep them stuck in a year-long earnings recession.

The biggest decliner on the STOXX 600 was Danish services company ISS (ISS.CO), slumping 14% after results.

Pressuring Norwegian shares .OSEAX was a 4% fall in fish farmer Salmar (SALM.OL) after warning of weak salmon output volumes for the current quarter.

Reporting by Sruthi Shankar in Bengaluru; Editing by Bernard Orr and Sriraj Kalluvila

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