UK markets open in 4 hours 38 minutes

LIVE MARKETS-Will Coronavirus infect airlines? Lessons from the past

* European shares 0.4% lower, Milan outperforms

* Travel stocks top sectoral decliners

* STMicro and Novozymes at multi-yr highs after estimate-beating results

* ECB rate decision later today Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Thyagaraju Adinarayan. Reach him on Messenger to share your thoughts on market moves: thyagaraju.adinarayan.thomsonreuters.com@reuters.net



WILL CORONAVIRUS INFECT AIRLINES? LESSONS FROM THE PAST (1155 GMT)

One way to assess possible risks of the new Coronavirus outbreak for the European airlines industry is to look at the damage from past global virus crisis (H1N1, SARS and Ebola).

Credit Suisse has done so and although the severity of the latest outbreak is uncertain for now, global virus overall had "little historical impact" on the industry.

However, if we look in detail what happened during 2003 SARS crisis, with a final death toll of 774 people, SARS was to blame as a major contributor to the weak revenues over the period, CS says.

Air passenger volumes were considerably impacted by SARS, most notably in Q2 in 2003, with traffic to China falling by 49% YoY albeit off a base seven times smaller than today’s passenger volumes, CS says.

Over the same period, Lufthansa reported that Q2 APAC traffic dropped by 16% (yields down 7%), which was wholly attributed to the SARS crisis. All of the major European and US carriers cited a normalization of trends by H2 of 2003., CS adds.

(Danilo Masoni)

*****



THE CURIOUS CASE OF SPANISH BANKS (1137 GMT)

If you take a look at the Spanish index, you might be surprised that banks are doing well today after Bankinter, Spain's fourth biggest bank by market value, said its profit went down 13% in Q4.

There is a trick: even though profit was down in the final quarter of the year it still beat expectations and the bank's net profit for the entire 2019 increased 5% to a record of 551 million euros.

Bankinter is up 3.1% and it helped competitors Caixabank, Banco Santander , Banco de Sabadell and BBVA, which are all up around 1.7 and 0.7%.

The real question is: Is Bankinter's annual result or the latest quarter the strongest indicator of how Spanish banks will be performing going forward?

UBS seems to believe earnings of Spanish banks will not jump high.

"When put all together, we still forecast a decline in earnings and profitability terms for all banks in 20E," UBS bank's analysts write.

But UBS has mixed feelings on how shares will cope: it has a buy rating on Santander, Unicaja and BBVA, neutral on Caixabank and Banco de Sabadell and a sell rating on Bankia and Bankinter.

(Joice Alves)

*****


ITALY OUT OF SYNC (0904 GMT)

We mentioned yesterday that investors are not overly worried about political turbulence in Rome and some of them said declines in Italian assets should be faded.

The resignation of Di Maio as 5-Star leader dealt a blow to Italy's governing coalition, just a few days before regional elections, but that's not expected to bring down the government.

Little surprise then that after yesterday's underperformance, Milan is the only bourse in positive territory today, as banks gain, helped by yields on the country's sovereign bonds falling to a five-week low.

"It's unlikely that the new (5-Star) leader would want to throw the party into an early vote. The greatest risk is that... a rise of defections in parliament towards the League takes away the majority," says Giuseppe Sersale, fund manager at Anthilia in Milan.

Italy's FTSE MIB index is last up 0.3% while the broader STOXX 600 is down 0.4%.

Here's your morning headline from Italy:

(Danilo Masoni)

*****



OPENING SNAPSHOT: TRAVEL STOCKS BRUISED, STMICRO AND NOVOZYMES FLY (0828 GMT)

European stocks on the backfoot as expected and all broad-based moves point to risk-off mood among investors as China virus scare hits travel stocks and a potential auto tariff dents cars.

In single stocks, Hochtief and its majority owner ACS drop sharply after Aussie unit CIMIC Group expects to take a one-off charge of $1.23 billion from its Middle East exit.

In earnings, Novozymes, ASOS and STMicro stocks are flying after their estimate-beating results.

Airlines and hotels are under pressure with IHG and Air France at the bottom of the STOXX travel & leisure index.

Banks and insurance stocks are top sectoral performers (although just barely in black) ahead of the ECB interest rate meeting later today.


(Thyagaraju Adinarayan)

*****



ON OUR RADAR: TRAVEL STOCKS, ASOS, STMICRO (0753 GMT)

Rapid spread of a new flu-like virus in China is sending a chill down Europe with stock futures pointing to a 0.4% decline, a day after Germany's DAX and the pan-European STOXX 600 briefly touched record highs.

Investors are also cautious ahead of ECB's rate decision later today.

Among sectors, auto stocks are likely to continue to crumble under pressure as Trump's latest tariff threat adds onto to worries of falling sales and shrinking margins.

Airlines, hotels and luxury sectors are on our radar as tourism will take a hit due to virus scare in China, just as millions were preparing to travel for the Lunar New Year.

UK's IHG says will allow customers to change or cancel stays scheduled up to Feb. 3 across mainland China, Hong Kong, Macau and Taiwan at no additional cost.

It's earnings Thursday here and some decent beats could come to rescue the downbeat sentiment in markets. European chip stocks are in focus after STMicro's fourth quarter earnings beat. Traders see STMicro shares to open flat to 3% higher.

ASOS sales raced past estimates (+20% vs. consensus of +15%) in latest evidence that online retailers have had a great Christmas at the cost of high street players. ASOS is seen rising 5% to 7% -- a positive read across for Boohoo and Zalando.

Other significant moves: Germany's Hochtief seen 5% down on 800 million euro on-time charge; Lufthansa seen +2% after report on potential listing of stake in its jet-maintenance unit; Mothercare seen down 5%, trader says positive tones around the rescue and refinancing, but the administration of Mothercare UK has cost a further 10 million pounds


Headlines to digest:

Getlink's revenues hit by Brexit and strikes in France

STMicro posts Q4 net revenues beat but sees sales slowing q/q

Lufthansa weighs listing of stake in jet-maintenance unit- Bloomberg

Britain's ASOS beats sales forecasts in Christmas period

IHG to waive fees for China hotel stay cancellations amid viral outbreak

Anglo American's fourth-quarter output rises on Brazil mine strength

Mothercare Says Recapitalisation On Track, CEO To Leave

UK's Blue Prism says momentum building after revenue rises 83%


(Thyagaraju Adinarayan)

*****


STOCKS ON BACKFOOT ON CHINA VIRUS SCARE (0650 GMT)

European stocks are seen edging lower ahead of the ECB's rate decision and as investors continue to worry about the spread of spread of a new flu-like virus in China. The caution in Europe follows a steep 3% sell-off in Chinese stocks.

Auto stocks could come under further pressure as U.S. President Trump threatened to impose high tariffs on imports of cars from the European Union if the bloc doesn't agree to a trade deal.

Financial spreadbetters IG expect London's FTSE to open 9 points lower at 7,563, Frankfurt's DAX to open 46 points lower at 13,470 and Paris' CAC to open 21 points lower at 5,990.

It's also a busy day for earnings with a slew of earnings reports pouring in. STMicro , which provides chips and sensors to Apple and Tesla, reported Q4 sales slightly above its outlook but warned of a slowdown next quarter.


(Thyagaraju Adinarayan)

*****



(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)