* UBS sees Europe economy shrinking by 4.5% in 2020
* Travel and leisure stocks lead declines
* Energy stocks sole gainers on Total, Shell
(Updates to close)
By Ambar Warrick and Sagarika Jaisinghani
March 23 (Reuters) - European shares fell again on Monday as
the continued spread of the coronavirus fed into panic over its
economic shock, with a recession in 2020 looking likely.
The benchmark STOXX 600 index ended 4.3% lower,
erasing nearly all of its gains over the past two days,
indicating that stimulus measures by major banks and governments
appeared to be doing little to reassure investors.
Markets had briefly pared losses earlier in the day after
the U.S. Federal Reserve underlined aggressive action to offset
the economic disruption from the outbreak.
However, they swiftly sank back to session lows as the
prospect of recession gave little impetus to buy into equities.
"The lockdown of large parts of Europe over the past two
weeks has sharply worsened the economic outlook and a recession
now appears inevitable," UBS economists wrote in a note, adding
they expect the European economy to shrink by 4.5% this year.
"The economic shock Europe is facing will be very
substantial."
Travel and leisure stocks continued to underperform
their peers as more countries closed their borders and limited
domestic movement.
British theatre operator Cineworld bottomed out the
sector as British measures to combat the spread of the virus
effectively crippled social life in the country.
Greece joined France and Spain in announcing a nationwide
lockdown, while Italy banned even domestic travel as the number
of fatalities there topped 6,000.
Industrials shed about 6% amid widespread factory
shutdowns to curb the spread of the virus. British office space
provider IWG shed 17% after it suspended its final
dividend.
German shares shrugged off a 750 billion euro
stimulus package from Berlin, closing about 2% lower as major
car makers face a dual hurdle of production curbs and flatlining
demand.
In another sign of growing corporate damage from the
outbreak, Airbus fell nearly 14% after saying it was
withdrawing its 2020 financial forecast, dropping a proposed
2019 dividend and suspending funding to top up staff pension
schemes.
Nestle SA, the largest stock on the STOXX 600,
dropped 6% for the day as its chief executive told employees to
prepare for a "coronavirus storm", an internal memo showed.
Oil and gas heavyweights Total and Royal Dutch
Shell both rose 6% after suspending their respective
share buybacks and outlining cost cuts to cope with lower oil
prices.
The two took the oil and gas subindex marginally
higher for the day, making it the only gaining European sector.
(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by
Shounak Dasgupta, Bernard Orr)