Worst Plunge Since 2008 Drags European Stocks Into Bear Market

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A sweeping equity sell-off across Europe dragged several stock benchmarks into a bear market after an all-out price war in oildealt a fresh blow to investors already grappling with jitters about the spread of the coronavirus.

The Stoxx Europe 600 Index ended 7.4% lower, the most since the aftermath of the Lehman Brothers collapse in 2008, taking its slide since a February record high to more than 20%. The Euro Stoxx 50 Index as well as benchmarks of Italy, Germany, Spain, France and the U.K. also entered bear territory. A gauge for energy shares plunged a record 17% to levels not seen since 1997.

The virus outbreak beyond China has spurred a meltdown in risk assets worldwide, wiping about $11 trillion of market value from the MSCI All-Country World Index since Feb. 19. The S&P 500 Index fell as much as 7.4% before trimming some losses.

“I don’t think it’s time to be brave,” Altaf Kassam, EMEA Head of Investment Strategy & Research at State Street Global Advisors, said by phone. “Now might not be the right time to try and capture the falling knife and it makes sense to wait a bit.”

The Stoxx 600 slid for a third day, after optimism over policy measures last week proved all too brief. The FTSE MIB Index tumbled 11% on Monday after Italy’s attempted lockdown in the country’s industrial and financial heart added to pessimism about stocks and bonds in the nation most affected by the coronavirus outside China.

“The market is clearly in panic mode, pricing in a full recession,” said Natalia Aguirre, head of research and strategy at Madrid-based Renta 4. “It’s a very complicated situation in which I would recommend to stay put, not succumb to the hysteria and sell. But I wouldn’t either say we are yet at the buy-the-dip moment as there are still lots of uncertainties.”

Energy shares were dragged lower by oil giants such as BP Plc and Royal Dutch Shell Plc, after the collapse of talks between OPEC and Russia prompted Saudi Arabia to launch a price war. Overall, all 19 industry groups in the Stoxx 600 fell more than 4% on Monday.

“Coronavirus risk will not fade away anytime soon and the oil situation is increasing the risk of defaults of oil companies that would affect banks so I wouldn’t rule out we see drops of 35%-40% from the peak,” said Alfonso Benito, chief investment officer at Spanish asset manager Dunas Capital. “So even if stocks are cheap we can still see further drops.”

— With assistance by Jan-Patrick Barnert, and Albertina Torsoli

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