Europe close: Stocks reel amid drag from oil and gas sector

Stocks across the Continent succumbed to heavy selling pressure again as some observers fretted that a proposed US stimulus package might fall short, even while keeping an eye trained on longer-term government bond yields and the price of oil slid again.

Key to the debate around the necessary amount of fiscal stimulus, which in any case would be expected to push bond yields higher, was whether a vaccine for the COVID-19 coronavirus would be found quickly enough to avoid new lockdowns in 2021.

Commenting on the investors' fears, CMC Markets UK's Michael Hewson said: "The widespread and wholescale economic shutdowns being announced in the last few days, have the potential to plunge millions of people into huge financial difficulties as governments take high stakes steps to beat back the invisible enemy of the COVID-19 pandemic."

One observer who has cautioned about the risk of a back-up in bond yields is Bridgewater head Ray Dalio, whose hedge fund had reportedly already suffered big losses in that asset class in the recent past.

By the end of trading, the benchmark Stoxx 600 was 3.92% lower at 279.66, alongside a 5.56% drop on the German Dax Xetra to 8,441.71, while the FTSE Mibtel was down 1.27% at 15,120.48.

In parallel, yields on 10-year Italian government bonds rose by only eight basis points to 2.43%, but their spread or 'risk premium' against similarly-dated German bunds earlier rose to as high as 322 basis points - the widest since February 2019.

Yields on 10-year German bunds meanwhile added 22 basis points to -0.22%.

Meanwhile, Brent crude oil futures slumped 12.5% to $25.61 a barrel on ICE to near its 2003 lows, sending the Stoxx 600 Oil&Gas sub-index down 9.8%.

On the coronavirus front, the number of new cases outside of the People's Republic of China had fallen by 17% over the last 24 hours, their first decline for 10 days, led by drops in Italy, Spain and Iran.

Yet analysts at ShoreCap were cautious, telling clients: "We are cautious around the numbers in Europe (as it is currently in “response mode”) and we expect Iran’s number is a result of delayed reporting."

In Italy, the country' transport minister, Paola De Micheli, told Rai 3 that the lockdown might be extended past 3 April, while the Lombardy's top health official said that if the curve of new infections did not move lower then more stringent measures might have to be implemented.

Italy had reported 345 new deaths linked to the coronavirus in the last 24 hours, pushing the total to 2,503, for a 16% increase versus Tuesday.