European shares drop on doubts over speedy recovery

European shares retreated on Thursday as comments from U.S. officials fanned concerns of a prolonged economic downturn due to the coronavirus outbreak, while investors eyed the prospect of a second wave of infections fearfully.

The pan-European STOXX 600 slid 1.7%, falling past a one-week low hit on Wednesday after the Federal Reserve Chair Jerome Powell warned of a recession worse than any since World War Two, and called for additional fiscal spending.

Automakers .SXAP, oil and gas .SXEP and technology firms .SX8P led declines, with TeamViewer (TMV.DE) falling 5.2% after private equity firm Permira sold shares worth 1.03 billion euros ($1.1 billion) in the German software company.

After staging a sharp rebound from mid-March lows, the STOXX 600 benchmark stock index has lost about 3% in May amid worries that early easing of lockdowns by certain countries will cause a spike in infection rates.

“There was too much optimism around how quickly we’re going to come out of lockdowns,” said Roger Jones, head of equities at London & Capital.

“But now the reality has dawned that it’s going to be quite a gradual recovery and all the stimulus that has been put in place is just to make sure that the economic situation does not collapse.”

Euro STOXX 50 volatility index .V2TX, also known as the fear gauge, touched its highest level since May 5 at 35.99 points. Portuguese retailer Jeronimo Martins (JMT.LS) tumbled 12% to the bottom of the STOXX 600 after it withdrew its forecast for 2020 due to the uncertainty stemming from the pandemic.

Airbus (AIR.PA) slipped 1.4% following a report that the aerospace group is exploring restructuring plans involving the possibility of “deep” job cuts, industry sources said.

In contrast, pan-European exchange operator Euronext (ENX.PA) gained 3.5% after reporting a 55% jump in quarterly revenue, partly driven by heavy trading in March that has propped up profits for some banks and brokerages.

Hargreaves Lansdown (HRGV.L) jumped 6.9% to the top of the FTSE 100 after the British fund supermarket said it saw higher trading demand from its retail clients and an increase in net new business.