Stocks – Europe Sells Off; Germany Faces Hefty Virus Cost

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By Peter Nurse – European stock markets traded sharply lower Monday, with investors worried about the extent of support from policymakers to combat the economic damage from the coronavirus. 

At 03:35 ET (0835 GMT), the U.K.’s index was trading 4.5% lower, 40 was down 4%, while the dropped 4.5%. The broader based Europe index dropped 4.5%. 

The coronavirus crisis could cost the German economy as much as 729 billion euros in 2020, the Ifo economic institute said on Monday.

“The costs will probably exceed everything known from economic crises or natural disasters in Germany in recent decades,” Ifo President Clemens Fuest said in a statement.

The statement comes after Germany imposed a two-week nationwide ban on all non-essential business and social meetings.  At the same time, U.S. politicians failed to agree on the terms of a funding package of more than $1 trillion, resulting in it not getting enough votes in a key Senate procedural vote late Sunday.

All the while, the number of confirmed cases of the Covid-19 virus continues to rise. Globally, there are now over 341,000 confirmed cases, more than doubling in the last week, and approaching 15,000 deaths.

Trillions of dollars of support have been injected into markets and the broader economy in the last week or so, but investors are still looking to policymakers for more in the coming days with companies losing customers and workers being thrown out of jobs. 

In corporate news, Airbus (PA:) shares slumped 7.6% after it announced the signing of a credit facility for 15 billion euros ($16.1 billion) to bolster its financial position as the pandemic cripples the travel industry.

The European planemaker added it was withdrawing its 2020 financial guidance, dropping a proposed 2019 dividend that had a cash value of 1.4 billion euros and suspending funding to top up staff pension schemes.

Royal Dutch Shell (AS:), meanwhile, said it will cut its capital spending program by over $5 billion as part of a package of measures aimed at saving between $8 billion and $9 billion. Shell shares dropped 3.1%.

Also in the energy sector, Total (PA:) announced plans to step up cost cuts and suspend its share buyback program in order to deal with a slump in oil prices. Total stock fell 2.6%.

French state-controlled power group EDF (PA:) said that it was currently forecasting 2020 core earnings at the lower end of its 17.5-18 billion euros ($18.7-$19.3 billion) forecast target range. EDF shares dropped 3%.

Economic indicators are limited in number in Europe Monday, with the eurozone consumer confidence figure, at 11 AM ET (1500 GMT), set to show a sharp drop, unsurprisingly. 

However, the PMI data coming out later this week in the U.S., U.K. as well as the euro zone will be of interest as they are likely to provide the most comprehensive overview so far of the coronavirus impact.

The positive tone seen in the oil markets as last week drew to an end has also largely disappeared. 

At 03:35 ET, futures traded 1.1% lower at $22.39 a barrel, recovering a little. The international benchmark contract fell 5.7% to $25.45.

Elsewhere, rose 0.5% to $1,492/oz, while traded at 1.0705, up 0.1% on the day.

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