Europe close: Stock markets suffer worst daily loss on record

Europe's main stock market gauges crashed on Thursday after the European Central Bank's latest policy decision wrong-footed some analysts and following a surprise temporary ban by Washington on travel from European Schengen-area countries that sent travel and leisure stocks hurtling lower.

"The market is aggressively pricing for a major global recession. There is total uncertainty and no one in the market has ever dealt with this kind of thing, said Neil Wilson, chief market analyst at Markets.com.

"No one knows what a total economic shutdown, however temporary, looks like. Shares are simply reflecting deep anxiety about the global economy."

By the end of the session, the benchmark Stoxx Europe 600 index was down 11.48% at 294.93, Germany’s Dax was 12.24% lower at 9,794.24, while France's CAC 40 had fallen 12.28% to 4,044.26.

The Stoxx 600 sub-index for travel and leisure slumped 13.15% to 154.81 after Trump's announcement, with Air France KLM down 13%, Deutsche Lufthansa 12% lower and British Airways and Iberia parent IAG down 16%.

Washington said it would suspend most travel from the European Union, Iceland, Norway and Switzerland for 30 days as it looks to combat the spread of the coronavirus.

Shares prices were weak from the very start of trading, with some investors critical of the scope of the US fiscal stimulus measures outlined overnight and what some observers said were limited details on US preparations to confront the coronavirus.

Commenting on a speech by the US President overnight, Michael Hewson, chief market analyst at CMC Markets UK, chipped in saying: "If anything, it spoke to a US administration in denial about the challenges being faced within the US."

Adding to markets' nervousness, the European Central Bank did not trim interest rates as financial markets - but not all analysts - had been anticipating.

Economists were mixed in their reactions, but comments by ECB chief Christine Lagarde to the effect that widening spreads on Italian debt were not part of her remit were criticised by some due to their importance for the effectiveness of the central bank's policies.

Investors were thus left waiting on the result of a meeting of euro area finance ministers scheduled for the start of the following week, were it was hoped that they would agree on a concerted fiscal stimulus package.

In other news that was weighing on stock prices, also overnight Italy had announced the closure of all non-essential shops.