Regulatory authorities in a number of European countries have banned short-selling on a variety of stocks for 24 hours, hoping to curb the ongoing sell-offs seen throughout the continent as a result of the coronavirus.
This morning, France announced that it would be joining Belgium and Italy in suspending the activity.
The reputation of short-sellers in the financial community is mixed. Whereas some critics describe them as vultures capitalising on failing businesses, others defend them as capitalism’s useful counterweights, cutting dead wood and improving market efficiency.
With 64,921 confirmed Covid-19 cases across the continent and 2,974 deaths, Europe has officially become the epicentre of the virus that originated in Wuhan, China.
Whereas Italy and Belgium have both banned the shorting of 20 or so stocks, the Autorité des marchés financiers (AMF) stopped such trades on 92 companies. This arguably reflects France’s increasingly concerned attitude to the Covid-19 virus.
On Monday, President Emmanuel Macron stated: “We are at war. Certainly, in a healthcare war” and called for a “great general mobilisation” to fight the “invisible, elusive” enemy.
In a call with reporters the French Foreign Minister, Bruno Le Maire, was equally dramatic, vowing: “We are standing ready to take stronger decisions if necessary. We want to avoid speculation on markets. We will use all the means available to us to protect our businesses.”
If the French economic situation deteriorates further then it is possible that Le Maire will follow the lead of his Spanish and South Korean counterparts and impose a longer ban on short-selling.
France’s Cac 40 has fallen to its lowest level since 2013 after falling 35.98 per cent in the past month alone. By late-afternoon Tuesday trading the country’s leading index stands at 4,019.33, up 3.55 per cent.
This could either indicate that the government’s promise to bolster affected businesses has restored confidence to the market, or that the damage to the French economy has already been done.