Stocks - Europe Falls Back; Virus Measures in Place for Longer

By Peter Nurse

Investing.com - European stock markets fell sharply on Monday, weighed on by President Donald Trump's decision to abandon his plans for an early reopening of the U.S. economy as the coronavirus pandemic showed no signs of abating.

At 3:55 ET (0745 GMT), the U.K.'s FTSE index was trading 3.7% lower, France's CAC 40 was down 3.0%, while the DAX fell 1.8%. The broader based Stoxx 600 Europe index dropped 2.4%.

The tone within the market remains cautious as the number of Covid-19 infections headed rapidly towards 750,000 worldwide. The number of deaths from the virus in Italy, the epicenter of the outbreak in Europe, is now well over 10,000, according to data from Johns Hopkins University.

Overnight, President Donald Trump had abandoned his hope of lifting restrictions on the U.S. economy by Easter, extending the current guidance on social distancing to the end of April. Trump said while 100,000 is "a horrible number," if the U.S. can keep its death toll to "100,000, so we have between 100,000 and 200,000, we altogether have done a very good job."

Earlier Monday, the People’s Bank of China cut the rate on 7-day reverse repos, which acts as an informal reference point for its other lending facilities, to 2.2% from 2.4%, the largest reduction in nearly five years. The PBoC injected 50 billion yuan ($7.04 billion) into the banking system through repos this week.

“We see this rate cut as a move to avoid a financial crisis because liquidity has been ample in the Chinese interbank market,” ING analyst Iris Pang said, in a research note.

There is a lot of economic data coming out of the euro zone this week. Monday’s March economic sentiment data, at 5 AM ET, will offer insights into how businesses and consumers assess the situation, even though the numbers predate new restrictive measures put in place since the survey was conducted.

In corporate news, UBS (NYSE:UBS) announced that it is maintaining its previously announced dividend for 2019. However, Unicredit (MI:CRDI) and Dutch banks ING (AS:INGA) and ABN AMRO (AS:ABNd) (AS:ABNd) as well as the Bank of Ireland (LON:BIRG) all said they will suspend payouts to conserve cash.

The European auto sector will also be in focus Monday after Japan’s Toyota Motor Corp (T:7203) announced that it has suspended production in all its European factories.

French carmaker Renault (PA:RENA) followed suit, saying production at all its plants across the world had been halted due to the impact of the coronavirus crisis, apart from its plants in China and South Korea. Renault shares dropped 1.8%.

In the U.K., EasyJet shares fell 9.3% after the airline said it will ground its fleet entirely, while public sector contractor Kier Group (LON:KIE) said it Monday will cut wages for about 6,500 employees, including executives and board members, by between 7.5% and 25% for the three months beginning April. Kier shares fell 2.2%.

Oil markets also tumbled to a 17-year low on Monday as the pandemic continued to hurt demand while a price war between Saudi Arabia and Russia remained unresolved.

At 3:35 AM ET, U.S. crude futures traded 6.0% lower, at $20.21 a barrel, on the prospect of lower U.S. fuel demand for longer. The international benchmark Brent contract fell 6.0% to $26.26.

Elsewhere, gold futures fell 0.5% to $1,645.30/oz, while EUR/USD traded at 1.1068, down 0.7% on the day.

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