UPDATE 1-Italy, Spain curb trading to stem coronavirus market crash

Valentina Za and Nathan Allen

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MILAN/MADRID March 13 (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 outbreakk that saw European stock exchanges post their worst-ever losses on Thursday.

Spain's regulator said late on Thursday 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.

Italy and Spain made the move as alarm over coronavirus intensified. 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.

On Thursday, Italy, which saw stocks slide 17%, led a dive across major European markets, whic saw 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.

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. (Reporting by Valentina Za and Nathan Allen; writing by John O'Donnell and Rachel Armstrong; editing by Jason Neely, Larry King)