European shares dipped on Tuesday as concerns deepened about the spread of a mysterious virus in China, just as hundreds of millions of people begin travelling for Chinese new year.
The new virus belongs to the same family of coronaviruses that causes Sars. The 2002-03 outbreak of that virus killed at least 650 in China and Hong Kong, and caused substantial economic damage and disruption.
Major European indices ended trading lower on Tuesday, following the sell-off in Asian markets, where Hong Kong’s Hang Seng closed 2.8% lower and the Shanghai Composite index ended the day 1.4% down.
Shares in airlines which operate long-haul flights, from British-Airways owner IAG to Air France and Lufthansa, fell 2-3.5%, because of fears of a major outbreak at a peak travel time for lunar new year celebrations.
Other losers were luxury goods groups, which rely on China for a significant proportion of their sales, including Gucci-owner Kering, LVMH, Burberry and Hermes. At the time of Sars some luxury groups lost about 30% of their value in three months. Since then China has become a far bigger market for the top luxury labels.
China’s healthy ministry confirmed on Tuesday that the virus, which causes breathing difficulties, can be transmitted between humans. The central city of Wuhan is believed to be the epicentre of the outbreak, which has spread across the country and claimed at least six lives. The World Health Organization has called for a Wednesday meeting to consider whether to declare an international health emergency.
About 300 cases of infected patients have been confirmed by China, and there are also reports of cases in Thailand, South Korea and Japan. Several US airports have begun screening incoming airline passengers from central China.
The consultancy firm Capital Economics said the 2003 Sars outbreak had an economic and financial market impact, and especially hit travel and tourism spending, but it said the virus had little long-term impact on growth.
Even though China now plays a much bigger role in the global economy compared with 17 years ago, the consultancy said: “For the time being we are not altering any of our forecasts in response to the spread of the new virus.”
It added: “While we remain fairly pessimistic about the prospects for China’s equities relative to those elsewhere, that instead reflects our assessment of the outlook for the country’s economy and trade relations with the US.”