UPDATE 2-European shares drop on coronavirus cases, weak euro zone data

(Reuters) – European shares gave up earlier gains to trade in negative territory on Friday after the United Kingdom and Italy confirmed their first coronavirus cases, and with a set of disappointing euro zone indicators also weighing on sentiment.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 30, 2020. REUTERS/Staff

At 1204 GMT, the pan-European STOXX 600 was down 0.4%, while Britain’s blue chip index .FTSE was down 0.9% after England’s chief medical officer announced two patients had tested positive for the virus.

Milan’s main benchmark .FTMIB dropped 1.3% as the country’s cabinet declared a state of emergency after two cases of the virus were also confirmed in Italy.

“Each new case adds to the uncertainty about the virus,” said Philip Marey, strategist at RaboBank.

Miners .SXPP were the biggest losers, falling 1.1% on fears that China and it’s gigantic market for raw materials will come to a standstill should the epidemic worsen further.

Travel and leisure .SXTP stocks also extended losses as more airlines suspended flights to China, the center of the epidemic.

Concerns about the euro zone economy also pushed stocks downwards.

Economic growth in the bloc was less than expected in the last quarter of 2019, mainly due to GDP contractions in France and Italy, while core inflation slowed in January in a worrying sign for the European Central Bank.

The United Kingdom’s official exit from the European Union later on Friday was not having an immediate impact on stocks but it fuels uncertainty going forward.

“The EU and the UK have to negotiate the far-reaching free trade agreement but there’s only 11 months left for this. This is probably not enough time,” said Jörg Krämer, chief economist at Commerzbank AG.

The pound GBP= continued to firm against the dollar, rising 0.2% a day after the Bank of England decided to hold off cutting interest rates.

Meanwhile, earnings updates from Spanish lenders were mixed with Caixabank (CABK.MC) edging up after quarterly net profit more than doubled, while Banco Sabadell (SABE.MC) tumbled more than 11% after the lender swung to a loss in the fourth quarter.

Home appliances maker Electrolux (ELUXb.ST) was among the worst performing stocks after it warned the coronavirus outbreak would impact its sourcing of products and components from China.

France-based healthcare company Novacyt (ALNOV.PA) (NCYT.L) shot up more than 50% after saying it had launched a new molecular test for the coronavirus.

Reporting by Medha Singh in Bengaluru and Alves Joice in London; Editing by Bernard Orr, Kirsten Donovan

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