European Indices Suffer Historic Single-Day Declines Amid Panic

European Stocks Collapse Alongside Dow Jones:

• The DAX 30 suffered a decline of -12.24%, its largest single-day decline since 1989
• The FTSE 100 fell -10.87% while the FTSE MIB crashed -16.62%
• Altogether, the declines across European equities were some of the worst in history

European Indices Suffer Historic Single-Day Declines Amid Panic

European stock indexes suffered double digit declines on Thursday as panic spread across global financial markets and the ECB fell short on market expectations and containment procedures look to eviscerate economic activity. As selling progressed in US trading, the Federal Reserve announced a behemoth-sized liquidity injection after losses on the Dow Jones, S&P 500 and Nasdaq tripped yet another circuit breaker.

Data from TradingView, created by Peter Hanks

While the Fed’s operations look to provide a short-term cushion for the equity market, precipitous declines in the bond and gold markets suggest the selling has reached another stage. With the three markets – which are typically situated on opposite ends of the risk curve – trading lower in tandem, it can be argued investors are liquidating positions to cover margin requirements or liquidating in favor of pure cash.

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Either way, the resultant price action and central bank intervention speaks to the pressure markets are currently experiencing. Despite years of gains being erased in mere days, further losses may be on the horizon as the United States begins quarantine and containment procedures. Given Italy’s response to the virus, investors may be fearing the prospect of total lockdown, an event that would effectively erase economic activity and expected corporate profits in the world’s largest economy.

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Further still, liquidity concerns have begun to permeate throughout the market which could beget continued selling as investors panic. In any event, the probability of an economic recession has climbed higher and equity gains may be short-lived as traders grapple with the historic price swings and volatility . In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX