European Stock Exchanges Ban Short-Selling, Massive Stimulus Needed

Equity Markets and Coronavirus – Prices, News and Analysis:

• Equity markets mired in bear market territory.
• Fiscal and monetary boosts required to stop the economic rot.

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European Equity Markets Precariously Poised

As the coronavirus spreads unabated, some European stock markets are banning short-sellers to try and stem the ongoing losses in the equity markets. Spain has banned short-selling for a month, while France, Italy and Belgium have also stopped the practice for shorter time frames to stop further losses. The Spanish equity market is currently 38% lower this year, France is down 37%, Italy has fallen by 41%, while the Belgium exchange has also shed around 40%. This massive loss of value over the last few weeks has prompted the current bans which may well be extended and copied by other exchanges if indiscriminate selling persists. The Euro Stoxx 50, made up of the 50 largest and most liquid European stocks, is down 37% this year with little support seen on the weekly chart until just over the 2,000 level.

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Euro Stoxx 50 Weekly Price Chart (April 2013 – March 17, 2020)

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Central banks around the globe now to need to consider boosting their current monetary action further, while member states need to add a fiscal boost to stem the current economic mayhem. Countries around the world are either in or heading into recession and it will need a concerted global effort to try and cushion the economic blow. While monetary policy has helped to buffer the effect of the coronavirus, its effectiveness is wearing thin. A full-blown, whatever it takes, monetary and fiscal wave of liquidity and bottom-up support is now desperately needed.

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