UPDATE 3-European stocks kick off May on dour note, ThyssenKrupp leads losses

  • Reuters
  • Stock Market News
UPDATE 3-European stocks kick off May on dour note, ThyssenKrupp leads losses
Credit: © Reuters.

* ThyssenKrupp sees cash squeeze, bottoms out STOXX 600

* U.S., China spat over virus keeps investors on edge

* Euro zone manufacturing collapses in April as virus spreads -PMI

* Oil and gas, automakers fall most among regional sectors (Updates to close)

By Sruthi Shankar and Ambar Warrick

May 4 (Reuters) - European stocks ended lower on Monday as investors were greeted with fresh Sino-U.S. tensions following a May Day break, after Washington threatened tariffs against China over the coronavirus.

The pan-European STOXX 600 .STOXX closed 2.7% lower in a downbeat start to the month, having risen 6% in April on hopes of major economies re-emerging from virus-related lockdowns. Euro zone shares .STOXXE were down 3.8%.

Sectors sensitive to economic growth, including oil and gas .SXEP , automakers .SXAP and banking .SX7P , were particularly rattled by the possibility of a fresh trade spat between the world's two largest economies.

U.S. Secretary of State Mike Pompeo said on Sunday there was "a significant amount of evidence" that the virus emerged from a Chinese laboratory, adding to concerns over threats of new U.S. tariffs on China in retaliation for the outbreak. Global Times said in an editorial that Pompeo was "bluffing".

European oil and gas stocks were among the worst performers for the day, tracking a tumble in oil prices. The sector was already on shaky footing after a crash in crude prices last month. O/R

"Sentiment continues to be dented by geopolitics as the blame game ramps up," Mark Taylor, a sales trader at Mirabaud Securities, wrote in a note.

"There has also been an air of optimism running ahead of itself despite continued reopening of various economies and Gilead (NASDAQ: GILD )'s positive drug news."

Germany's ThyssenKrupp TKAG.DE plunged 14% to the bottom of the STOXX 600 after its management board told staff in a letter that the pandemic could cause a new financial squeeze despite the sale of its elevator business. stocks had fallen from near two-month highs last week after dismal first-quarter GDP data, while the European Central Bank held off on further major policy moves to support the economy.

"An ‘unprecedented' fall in real output last quarter will be followed by much sharper declines this quarter and only a modest recovery thereafter," wrote Shweta Singh, Managing Director, Global Macro at TS Lombard, adding that the ECB would have to do more.

Data also showed that euro zone manufacturing activity collapsed through April, due to the virus. J.P.Morgan's equity analysts downgraded eurozone stocks to "neutral" from "overweight", saying a tilt towards value stocks such as banks was a drag and policy response to the COVID-19 crisis was weaker.

Germany's DAX .GDAXI fell 3.6%, while France's CAC 40 .FCHI dropped 4.2% as shares in automakers PSA PEUP.PA and Renault RENA.PA retreated on data showing French car registrations slumped by almost 89% in April.

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