European Stocks Reverse to Decline... France Bans Short Selling of Financial Stocks

[Asia Economy Reporter Kwon Haeyoung] Despite the sharp plunge in the US New York stock market the previous day, major European stock markets, which started higher on the 17th (local time), reversed to a decline. Although the nightmare of the US stock market's Black Monday has been avoided, investor sentiment, which has rapidly cooled due to fears of the novel coronavirus infection (COVID-19), has not recovered.

As of 8:38 PM Korean time on the same day, the UK FTSE100 index was trading at 5066.15, down 1.65% from the previous trading day. The German DAX index fell 2.18% to 8551.66, and the French CAC 40 index recorded a 1.62% decline to 3818.4 compared to the previous day.

As the COVID-19 pandemic has thrown global financial markets into turmoil, countries are implementing market stabilization measures. The French financial authorities banned short selling for all financial stocks listed on the Paris stock exchange for the day. The French government also stated that it could extend the short selling ban for the next month. Short selling is an investment method where investors borrow stocks expected to decline in price, sell them, and then buy them back at a lower price to return the borrowed stocks, thereby making a profit.

Meanwhile, the New York stock market closed lower across the board the previous day. The Dow Jones Industrial Average fell 12.93% to close at 20,188.52. The S&P 500 index dropped 11.98% to 2386.13, and the Nasdaq index fell 12.32% to 6904.59. The decline in the three major indices is the largest drop since the 1987 'Black Monday,' the most shocking event in the 120-year history of the New York stock market. At that time, the Dow Jones index fell 22.6%.