UPDATE 3-European stocks shed $1.5 trillion as virus fears spur week-long selling frenzy

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* STOXX down 12.2% for week, worst week since 2008

* British Airways owner IAG slumps after flagging hit from
virus

* Travel and leisure stocks worst weekly performers

* Rolls-Royce among rare gainers
(Adds details, updates to close)

By Ambar Warrick and Sruthi Shankar

Feb 28 (Reuters) - European shares ended the week down
roughly $1.5 trillion in their worst weekly performance since
the 2008 financial crisis as the rapid spread of coronavirus
outside China saw sustained selling on fears of a recession.

The pan-regional STOXX 600 index fell 3.5% on
Friday, deepening its slide into correction territory with a
13.2% plunge from a record high hit on Wednesday last week.

"The move today, and the week-over-week move is driven by
systematic, self-enforcing flows. We have seen a significant
amount of position reduction (this week)," said Philipp Brugger,
head of investment strategy at Union Investment.

All European sub-sectors were well in the red, with
chemicals, insurance and telecom leading
losses for the day, shedding more than 4% each.

Germany's BASF was among the biggest percentage
losers in the chemical subindex after it warned that earnings
could drop further this year.

Travel and leisure stocks underperformed their peers
by a wide margin over the week, dropping about 18%.

Airlines were the worst hit, with the situation intensified
after British Airways owner IAG said its earnings would
take a hit this year as passenger numbers tumbled.

The stock fell 8.4% on the day, while other airlines Easyjet
PLC, Air France, and Lufthansa AG
dropping between 0.9% to 6.4%.

Milan-listed shares fell 3.6%. The number of people
infected in Italy, Europe's worst hit country, surpassed 850 on
Friday.

German stocks dropped 3.9% as the number of cases
in the country rose to 60. Insurer Munich Re was
among the worst performers for the day after its fourth-quarter
profit dropped.

French publisher Lagardere SCA bottomed out the
STOXX 600 after reporting lower 2019 revenue. The firm also
appointed former French president Nicolas Sarkozy to its
advisory board.

Engines and automobile maker Rolls-Royce was among
the few gainers, ending up 3.2% after saying it was well placed
to deal with disruptions caused by the epidemic.

While investors have ramped up expectations for a euro zone
rate cut as soon as June in response to the virus, two ECB
policymakers said on Friday that the bank does not need to take
immediate action in response to the epidemic.

"The ECB situation has the additional challenge that they do
not have so much powder left, and in general the threshold for
them to move on an interest rate side is really high," Union
Investment's Brugger added.

The World Health Organization warned that the virus had
pandemic potential, and ratings agency Moody's saying it would
trigger a global recession in the first half of the year.

(Reporting by Sruthi Shankar in Bengaluru
Editing by Sriraj Kalluvila, Emelia Sithole-Matarise and Frances
Kerry)