Europe close: Stocks extend losses as countries ramp up containment efforts

Stock markets across the Continent took another leg lower on Monday despite moves by several of the world's central banks to loosen policy and as G-7 leaders committed to use all tools necessary to return economic growth to its pre-coronavirus crisis level.

But investor sentiment took a big hit from news of tightening lockdowns in Spain, France and Germany, together with weak economic data out of China and concern and concern about how successful measures to contain the coronavirus would be.

Economists said Chinese activity data for January and February pointed to a roughly 5% annualised drop in GDP in the first quarter, while others were anticipating a similar drop in the US but in the second quarter - albeit followed by sustained rebounds in both cases.

So while European shares finished off their lows of the session and some analysts recommended starting to wade back into the market, others remained cautious.

Among those, Chris Beauchamp at IG said: "We may have reached the end of the ‘panic’ stage of the selloff, but any ‘relief’ stage may be short-lived. If there is a sustained recession ahead of us, then the declines we have seen may be just the beginning, and a short-term bounce in coming months may not hold."

By the end of trading, the benchmark Stoxx 600 was down by 4.86% to 284.63, alongside a 5.31%% fall on the German Dax to 8,742.25, while the FTSE Mibtel slumped 6.1% to 14,980.34.

Travel&Leisure issues were the worst performers on the Stoxx 600, with a gauge for stocks in the sector dropping 10.06% and another for lenders down 8.4%.

"Policy needs to act fast and powerfully, beyond what we are currently seeing. [...] The European economy will be hit severely at least in 1H 2020. We need to make sure economic agents are able to smooth that shock as much as possible," chipped in economists at BofA.

IAG was one of the biggest fallers on the Stoxx 600, with its shares retreating 28% after telling markets that it would cut capacity by at least 75% in April and May.

But the steepest drops were seen in shares of Investec and rented office giant IWG.

Going the other way, stock in Danish maker of diagnostic equipment Ambu A/S paced gains, climbing 18%.

Swedish medical technology outfit Getinge AB was another big gainer during Monday's session.

The US Federal Reserve surprised with a 100 basis point cut in short-term interest rates overnight to near zero, although the decision not to wait until the 18 March meeting appeared to spook some traders - although most analysts had been calling for such a move.

Ian Shepherdson at Pantheon Macroeconomics wasn't among those who thought the Fed 'knew something that investors did not', but did believe that "Congress is asleep at the wheel".

The Fed also unveiled a $700bn asset purchase programme, cut banks' reserve requirements and put in place so-called 'swap' lines for US dollars, in order to ease a crunch in overseas demand for the Greenback, while central banks in South Korea and New Zealand also cut rates.

News from Asia showed new coronavirus cases were continuing to decline in South Korea and remained low in the People's Republic of China.

In Italy however, the caseload jumped by 2,795 on Sunday to reach 21,157, while in Spain they had risen by 806 on Monday to hit 8,794, with a large increase feared for over the coming week in particular.