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* STOXX 600 erases earlier gains of as much as 3.7%
* Travel and leisure stocks lose 50% of value in Q1
* Catering firm Compass Group set for worst day since 2004
* French stocks off 2013 lows as Macron offers fiscal aid
(Adds comments, details; updates prices)
By Sagarika Jaisinghani
March 17 (Reuters) - European shares retreated after an
initial bounce on Tuesday as damage being heaped on companies
and economies across the globe from the coronavirus grew and
kept financial markets on edge.
Sharp restrictions on large gatherings, shutdowns of major
cities and disruptions to business supply chains are taking a
toll on corporate Europe. The world's biggest catering firm
Compass Group and automaker Volkswagen Group
were the latest to warn of a hit from the pandemic.
Compass tumbled 22.2% and Volkswagen dropped 3%.
The pan-European STOXX 600 index was down 1.1%
after rising as much as 3.7% in early trading, following a
dramatic sell-off on Monday that dragged it to levels last seen
in 2012.
"With the news flow evolving quite rapidly and liquidity
tight, we're likely to see continued bouts of volatility, which
suggests that it's not a particularly sensible time to be trying
to do anything too aggressive from a trading perspective," said
Toby Gibb, head of investment directing at Fidelity
International in London.
"It is absolutely going to create a lot of (buying)
opportunities, but it doesn't feel like a good time to be
locking in losses."
All of the 19 European sub-indexes were trading in red, with
travel and leisure stocks plummeting 10% as drastic
containment measures forced airlines to make unprecedented cuts
to flights, costs and staffing.
British Airways parent IAG, EasyJet,
Ryanair and Air France-KLM were again among
the biggest decliners on the STOXX 600, bringing the wider
travel sub-index's total declines in the first quarter to over
50%.
Wall Street had recorded its worst decline on Monday since
the 1987 "Black Monday" crash as the unchecked spread of the
virus wiped out liquidity from financial markets and sent
volatility to record highs.
A coordinated effort by global central banks to flush more
cash into the system only added to the alarm around a looming
global recession.
Airbus tumbled 6.7% after saying it would stop
production and assembly activities at its plants in France and
Spain for the next four days in order to comply with the
government's containment measures.
The wider French bourse fell 1%, but was off 2013
lows hit on Monday as President Emmanuel Macron sought to
reassure businesses by offering more fiscal aid.
Frankfurt shares, which have declined in seven of
the past eight sessions, also shed 0.9% ahead of a reading of
German economic sentiment for March, which is expected to plunge
to -26.4 from +8.7 a month earlier, according to Refinitiv Eikon
data.
(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by
Bernard Orr)