March 10, 2020 / 9:53 AM / 18 days ago

UPDATE 2-European shares end red as virus uncertainty dashes initial gains

* STOXX 600 firmly in bear territory

* Italian stocks extend losses amid lockdown

* Coronavirus cases rise across the bloc

* Airline stocks get some respite from easing of slots rule (Updates to close)

By Ambar Warrick and Sruthi Shankar

March 10 (Reuters) - An early recovery proved short-lived for European shares on Tuesday with no end in sight to the coronavirus outbreak, as a jump in infections across the bloc unsettled investors already reeling from the oil price crash.

The pan-European STOXX 600 closed 1.1% down, slipping further into bear territory after marking its worst day since the 2008 financial crisis on Monday.

A surprise crash in oil prices compounded worries over a recession due to the outbreak, and had pushed oil and gas stocks into their worst drop ever on Monday.

However, with Italy now under lockdown, and Britain and Germany reporting higher cases of infection, investors have little impetus to stay in risk assets with widespread disruptions from the virus appearing to be likely.

"Traders are a bit nervy, the only positive news we've been getting out is probably rate cuts or tax cuts - we need news in terms of the actual control of the virus, which we don't seem to be having right now," said Michael Baker, analyst at ETX Capital in London.

A surprise jump in Swedish cases of the virus also fed more uncertainty into markets.

Italian stocks shed early gains to close at a more-than three-year low. The government is set to approve measures worth around 10 billion euros ($11.35 billion) to counteract the impact of the virus.

German stocks ended more than 1% lower, as coronavirus cases in Europe's largest economy rose over 1,100.

A Deutsche Bank economist expects the country's economy to shrink in 2020 due to the impact of the virus.

Among individual movers, Germany's Commerzbank closed up 3% after it said it was yet to see any impact from the outbreak on its business.

Italian highway operator Atlantia ended at a more-than six-year low amid concerns over a severe fall in traffic due to the outbreak.

German logistics firm Deutsche Post jumped 6% after saying it had started to see volumes in China recover from the impact of the coronavirus outbreak, and announced a bigger than expected annual dividend.

Airline stocks also rose about 0.2% to 4% after the European Union, in a move to give airlines more breathing space amid headwinds from the coronavirus, said it would suspend a rule requiring carriers to run most of their scheduled services or else forfeit landing slots.

Traders are now betting on an interest rate cut by the ECB later this week, although many see the bank having little room to cut, given that rates are already in negative territory. (Reporting by Sruthi Shankar in Bengaluru Editing by Bernard Orr/Mark Heinrich)

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