By Susan Mathew
(Reuters) - Deal talks and a rally in defensive sectors supported European shares on Monday as investors grappled with the potential impact of the coronavirus, while Irish stocks were hit by a strong showing for the left-wing Sinn Fein in a national election.
The pan-European STOXX 600 index <.STOXX> ended 0.07% higher, having marked its best week in three months as part of a broader rebound from an earlier virus-driven sell-off.
NMC Health <NMC.L> shot up 24% after revealing preliminary buyout approaches from private equity firms KKR <KKR.N> and GK Investment, while Italy's Exor <EXOR.MI> hit an all-time high after saying it is in talks to sell reinsurer PartnerRe in a deal that could be worth about $9 billion.
At the other end of STOXX 600 were Irish lenders Bank of Ireland <BIRG.I> and AIB Group <AIBG.I>, sliding 8.3% and 6%, respectively as investors feared a negative impact from Sinn Fein's policies, which include an end to tax breaks for banks.
Ireland's main index <.ISEQ> dropped 1.2% as significant differences in the manifestos of the three main political parties reduced hopes among investors for a smooth formation of a new government.
"Sinn Fein proposals on the economy are less conservative – especially on housing market issues - than those of Fine Gael and Fianna Fáil, but how this election will change Irish economic policies remains a big question mark given the difficulty of government formation," said Bert Colijn, senior economist, Eurozone at ING.
Oil stocks <.SXEP> were the worst performers in Europe, while commodity linked stocks <.SXPP> also slid as crude, iron ore and copper prices fell on worries over weaker Chinese demand in the wake of the coronavirus outbreak.
The virus has taken more than 900 lives in China, exceeding the death toll from the SARS outbreak over decades ago and analysts are attempting to quantify the economic fallout from production and supply disruptions from suspended operations in the country.
Data on Monday showed such fears had hit investor morale in the euro zone - down for the first time in four months in February.
Automakers <.SXAP>, among the most exposed to China, slumped 0.8%. BMW <BMWG.DE>, Volkswagen <VOWG.DE>, Peugeot owner PSA <PEUP.PA> and Renault <RENA.PA> all slipped more than 1%, weighing on the German <.GDAXI> and French <.FCHI> indexes.
While Germany's economy may be the most hit by the outbreak, it could also be the one that benefits the most when China rolls out massive stimulus to support its economy, said Andrea Cicione, head of strategy at TS Lombard. A need to ramp up infrastructure may see it tap Germany's expertise, he said.
Defensive sectors such as healthcare <.SXDP>, real estate <.SX86P> and utility stocks <.SX6P> - which investors turn to during times of turbulence - rose more than 0.3%.
(Reporting by Susan Mathew and Ambar Warrick in Bengaluru; Editing by Shounak Dasgupta and Mark Potter)