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* British Airways owner IAG slumps after flagging virus hit
* Travel, miners, tech and chemical stocks lead declines
* German stocks plunge as country warns of looming epidemic
* Rolls-Royce among rare gainers
(Adds comment, details, updates prices)
By Sruthi Shankar
Feb 28 (Reuters) - European shares slumped on Friday, on
course for their biggest weekly decline since the financial
crisis in 2008, on investor fears that the rapid spread of the
coronavirus outside China could trigger a global recession.
The pan-regional STOXX 600 index fell 4.2%,
deepening its slide into correction territory, a 10% decline
from its recent peak.
The index is currently trading about 14% below its all-time
high hit last week, while the wider selloff has seen $5 trillion
in value evaporate from global equities.
All European sub-sectors were well in the red, with miners
, travel and leisure stocks, technology
and chemical companies down between 4.3% and 5%.
In the latest evidence of damage from the outbreak, British
Airways owner IAG said its earnings would take a hit
this year as passenger numbers tumbled.
Germany's BASF also warned that earnings could
drop further this year, sending its shares down about 5%.
"The real difficulty here is that it will take time to
resolve and it will definitely have an impact on the global
economy," said Alexandre Deruaz, head of portfolio construction
for equities at Unigestion in Geneva, Switzerland.
"The question is: will growth turn negative or not globally?
If the trend sustains, you'll see recession in some specific
countries (and) Italy will be a candidate."
Milan-listed shares fell 3.6% as the number of
people infected in Italy, Europe's worst hit country, surpassed
650.
German stocks dropped 4% after the country warned
of an imminent epidemic, with heavyweights Linde Plc
and SAP SE leading declines. Europe's economic
powerhouse has teetered on the edge of a manufacturing recession
since 2019.
The World Health Organization warned that the virus had
pandemic potential, with ratings agency Moody's saying it would
trigger a global recession in the first half of the year.
Adding to the gloom, data showed French consumer spending
fell sharply in January, flagging a weak start to the year even
before the coronavirus outbreak began taking its toll.
Investors ramped up expectations for a euro zone rate cut as
soon as June, with money market futures showing that a 10 basis
point rate cut was now fully priced in.
Munich Re fell 6% after fourth-quarter profit
fell on major losses from natural catastrophes and other claims.
Thyssenkrupp dropped 4.7%, even as it announced
the sale of its elevators division to a consortium of Advent,
Cinven and Germany's RAG foundation for 17.2 billion
euros ($18.7 billion).
Aerospace engineer Rolls-Royce was among rare
gainers, up 5% after saying it was well placed to deal with
disruptions caused by the epidemic.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj
Kalluvila and Emelia Sithole-Matarise)