Europe close: Stocks extend losses as some investors balk at buying into weakness

An early bounce petered out quickly with traders worried that the China coronavirus could yet turn into a global pandemic, leaving share prices vulnerable as economic growth forecasts are marked down.

Against that backdrop, Mohammed El-Erian, economic advisor to Allianz, told broadcaster CNBC: "I would say continue to resist, as hard as that is, to simply buy the dip because it has worked in the past."

The pan-European Stoxx 600 fell 1.76% to 404.60, alongside a 1.88% drop for the German Dax to 12,790.49, while the FTSE Mibtel was off by 1.44% at 23,090.44.

Spanish stocks fared worst after around 1,000 guests at a resort in Tenerife were placed under lockdown, after a travelling Italian doctor tested positive for coronavirus and a woman in Catalonia who had visited northern Italy was diagnosed as the country's fifth virus case.

As analysts at ShoreCap put it: "At present the WHO do not deem the outbreak a pandemic but looking ahead the truthful answer is we don’t currently know and lack experience with COVID-19 to make an assessment."

Their peers at Rabobank were more critical, saying of the World Health Organisation: "The same institution that has been lavishing praise on China’s virus lockdown while simultaneously arguing that similar measures internationally were totally unnecessary is still refusing to call this a “pandemic”,--despite South Korea, and Iran, and Italy--a designation that would legally force the hand of governments world-wide."

Overnight, some Chinese cities had imposed restrictions on travellers from Japan and South Korea, the UAE had stopped flights from Iran and Austria, and Switzerland joined the list of countries with confirmed cases - even if only just 3 combined.

Yet according to the World Health Organisation's 35th update released overnight, the rate of new virus cases in China fell further on Monday, to 415, although some market commentary was calling into question the accuracy of the statistics.

Jefferies chipped in saying: "Perversely, the common enemy of the 'Coronavirus' means that if needed, the global fiscal purse strings can be loosened without fear of budget deficits."

Lenders' shares were among the worst hit on the Stoxx 600, with a gauge tracking the sector retreating by 2.55% amid expectations of further interest rate cuts by the European Central Bank and Travel&Leisure shares were 1.78% lower.

Cruise line operator Carnival was the worst performer on the Stoxx 600 amid the ongoing virus fears.

Shares of Commerzbank were near the bottom of the pile as well, alongside declines in BNP Paribas, Natixis, and Legal&General.

Arkema was the top gainer after a US district judge delayed opening arguments in a criminal trial against the chemicals group because the prosecution had not disclosed some of the evidence supporting its case.

Elsewhere on the economic side of things, German gross domestic product was flat over the fourth quarter in comparison to the previous three-month stretch, as expected.

In year-on-year terms, the rate of growth in German GDP slipped from 0.6% to 0.4%, which was also as anticipated.