MILAN/MADRID (Reuters) – Italy and Spain imposed trading curbs on stock markets, banning short-selling of dozens of stocks, to stem a market rout triggered by the coronavirus outbreak that saw European stock exchanges post their worst-ever daily losses.

The ban will put hedge funds and other investors on high alert for similar moves elsewhere, as governments grapple with a disease that has infected tens of thousands, threatening further deaths and hurting businesses globally.

Italy and Spain made the move as alarm over coronavirus intensified and sent stock markets into a tailspin. On Friday, Germany said it was not planning a ban, while France, which has yet to act either, said it had not observed a particular spike in short-selling so far.

On Thursday, Italy had seen stocks slide 17%, leading a dive across major European markets, which had their biggest daily losses on record. Spain’s IBEX-35 index dropped 14% on the day. A package of measures by the European Central Bank did little to calm nerves.

The disease has infected more than 127,000 people worldwide, caused public life in Italy to grind to a halt, prompted Spain to place four towns under quarantine and shut down schools and universities.

Spain’s regulator said the ban would apply to 69 stocks, including all liquid shares whose price fell more than 10% on Thursday, and all illiquid shares that fell by more than 20%. In Italy the ban will apply to 85 stocks.

Germany and France did not follow the move. The German stock exchange, Deutsche Boerse, said it would not impose such a ban. Nonetheless, the group, as well as German watchdog Bafin, did not rule it out, nor did France’s markets regulator, the AMF.

Bafin and the AMF said they were in contact with other authorities across Europe and that they were closely following the situation.

In short-selling, traders borrow a company stock with a view to selling it, hoping to buy them back later at a lower price and pocket the difference.

When the number of short-sellers outweighs those interested in buying the stock, which could happen if investors rush to sell amid panic over coronavirus, that can further drive down the price of shares.

Under EU law, national authorities have the power to introduce such bans. They are required to inform the EU umbrella body, the European Securities and Markets Authority.

Many countries curbed short-selling around the time of the 2008 financial crisis. While such bans can soften the impact of a shock, however, market experts say they only work for a limited time.

Under EU rules, hedge funds and others who engage in short selling have to notify the markets watchdog when they take bigger ‘short positions’.

In Spain, there were 129 such bets placed on Thursday, while Italy had 78, according to filings. In Germany, there were 335.

Neil Robson of law firm Katten Muchin Rosenman said such bans typically do not require investors to unwind existing positions but apply to future moves.

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