European shares slump as Apple warning hammers China-reliant sectors

By Susan Mathew

(Reuters) - European shares dropped on Tuesday as a revenue warning from Apple hammered iPhone parts makers and underlined the impact of the coronavirus outbreak on global supply chains.

However, the pan-European STOXX 600 index <.STOXX> ended off session lows helped by defensive buying as well as merger activity among Italian banks.

Milan shares <.FTMIB> closed at their highest in over a decade as Intesa Sanpaolo's (NYSE: ISP) 4.86 billion euro ($5.26 billion) bid for smaller rival UBI Banca sparked hopes of much-awaited consolidation among other Italian banks.

Italy's banking index <.FTIT8300> jumped 1.6% to close at a 1-1/2 year high, with UBI Banca soaring 24%.

Stock markets globally slid on Tuesday after Apple (NASDAQ: AAPL) said it would miss its March-quarter sales outlook due to the epidemic, which has killed over 1,800 people and forced businesses to shut operations.

After falling up to 0.9% during the session, the STOXX 600 closed 0.4% lower, retreating from Monday's record highs.

"Investors are clearly very keen to keep buying," said Connor Campbell, analyst at financial spread better Spreadex. "It took something like a warning from Apple that investors weren't willing to ignore."

Shares of AMS AG (NYSE: AMS), Dialog Semiconductor (NASDAQ: DLGS) and STMicroelectronics NV (NYSE: STM), which supply components to Apple, fell over 1.2%. Other chipmakers also dropped, taking Europe's technology index <.SX8P> down 0.7%.

Germany's Infineon said it has so far seen only a minor impact on business from the virus. Its shares were down 2.2%, while Frankfurt's main index <.GDAXI> fell 0.8%.

Other China-exposed sectors such as automobile <.SXAP> and basic materials <.SXPP> were the worst hit on the day.

Miner BHP Group dropped 1.4% after missing half-year profit estimates and flagging a risk from the coronavirus outbreak, while Glencore (OTC: GLEN) slid 4.5% after posting its first annual loss since 2015.

Renault shares slipped 6% after a UBS price target cut. The company had announced cost cuts last week.

British lender HSBC Holdings slid 6.6% after it said it would shed $100 billion in assets and cut 35,000 jobs over three years as part of a reorganization. It also said the coronavirus epidemic had significantly impacted staff and customers.

On the data front, a survey on Tuesday showed German investor morale deteriorated far more than expected in February on worries of the outbreak impacting world trade. Manufacturing PMIs from the eurozone on Friday will be keenly watched for more insights into the economic fallout from the epidemic.

Defensive sectors such as utilities <.SX6P> and real estate <.SX86P> were among the few gainers.

Among bright spots, food ingredients company Kerry Group touched an all-time high after saying it hopes to return its five Chinese factories to full capacity within weeks.

(Reporting by Ambar Warrick in Bengaluru; Editing by Saumyadeb Chakrabarty and Shounak Dasgupta)

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