European stocks tumbled the most on record after disappointing responses to the virus outbreak from the U.S. and Europe, wiping off $4 trillion in market value since the sell-off began late last month.

The Stoxx Europe 600 Index closed down 11%, erasing more in market cap since the Feb. 19 peak than the size of Germany’s economy. Investors reeling from a U.S. ban on travel from Europe were further disappointed by the European Central Bank’s decision to keep key rates unchanged, while boosting quantitative easing and liquidity tools.

All 19 industry groups tumbled more than 8%, while Italy’s benchmark FTSE MIB Index plummeted the most ever, closing at a seven-year low. Britain’s FTSE 100 index fell 11%, its steepest slide since the stock market crash of 1987.

The Stoxx 600’s biggest one-day drop since the gauge was introduced in 1998 came as U.S. peers plunged, triggering circuit breakers for the second time in a week. European banks also saw a record drop, while carmakers and insurers were the worst hit, down more than 15%.

“None of the ECB’s measures or any other monetary, fiscal or regulatory policy initiative can be the circuit breaker in the recession into which the eurozone seems to have fallen this month,” said Holger Schmieding, chief economist at Berenberg. “But the ECB package, and further steps by bank supervisors as well as by fiscal policy, can limit second-round effects.”

European stocks have tumbled 32% since last month’s record high, with the global policy response so far inspiring little confidence that the fallout from the spreading virus will be contained.

The ECB left its deposit facility and main refinancing rates unchanged, and added 120 billion euros ($135 billion) of net asset purchases through the end of 2020. Its president Christine Lagarde urged governments to work on a coordinated fiscal response, warning of a “major shock” to the prospects for global growth. German Chancellor Angela Merkel’s administration was said to be prepared to abandon its long-standing balanced-budget policy to help finance measures to contain the fallout of the coronavirus.

U.S. stocks sank as investors were underwhemed by the government’s virus response after President Donald Trump announced a sweeping 30-day ban on travel from Europe excluding the U.K. The Department of Homeland Security later clarified that the restriction applies generally to foreigners who’ve been in Europe within 14 days.

Here are further comments from market participants:

Oliver Blackbourn, Janus Henderson Investors

• “On the edge of exhaustion but still trying, the ECB did what it could today. Eurozone governments have previously ignored calls from the ECB for structural reforms, but perhaps this time they will listen to calls for fiscal stimulus. However, there was little indication of a coordinated approach between the ECB and major Eurozone governments. Indications that Germany may scrap its balanced budget stance are not enough; markets want to see decisive action and they want it now.”

Manish Singh, Crossbridge Capital

• “It’s not a liquidity problem. This battle is for Merkel to step up and fight, Lagarde is the foot soldier in this coronavirus war. The market needs to see decisive and effective political and fiscal leadership from the EU. Good first step, but not enough to lift the mood and change sentiment. We need strong fiscal response. Monetary policy bullet is spent and just a band-aid.”

Sebastien Galy, Nordea Investment Funds

• “The fact that the ECB didn’t go for more negative interest rates tells you about the complete lack of coordination between the U.S. and the EU. More negative interest rates are likely seen as a devaluation by the U.S. at the time of heavy trade negotiations and a travel ban.”

David Holohan, Mediolanum

• “While the initial reaction of banks and broader equities was lower, I suspect bank investors will quickly see that the ECB actions are aimed at supporting banks and their investment cases are improved in light of Temporary Capital and Operational Relief as opposed to lower interest rates.”

Patrice Gautry, UBP

• “The ECB is pushing on liquidity and cheap money to deliver backstop on credit. More is now needed at the EC and EU27 level in terms of budgetary side to deliver real backstop on the real activity.”

Thomas Gitzel, VP Bank

• “The ECB is trying to do its part to manage the crisis. The deposit rate was not further reduced, but other means are in focus. Small and medium-sized businesses in particular now need access to liquidity. The banking sector cannot help in all cases due to strict regulations. The ECB’s decision to relax regulations for banks’ capital ratios is therefore correct. In addition, however, flanking government special credit programs are now needed.”

Marco Bonaviri, Reyl & Cie

• “In the short-term this is supportive but not a game changer. This is what the intraday of EUR/USD and EUR rates are telling us so far. It is not the ‘big bazooka’ and, as a matter of fact, monetary policy is reaching its limits in Europe.”

Neil Birrell, Premier Miton

• “The ECB has stepped up to the plate and joined other major central banks with measures to try and stabilise the economic shock being caused by COVID-19. The fact that rates haven’t been cut doesn’t really matter as it wouldn’t have made much difference, but the market will be disappointed by that. It’s all about the liquidity package, which at first glance looks to be the targeted response that was promised.”

Phil Smeaton, Sanlam Investments

• “So far we have seen numerous easing measures from central banks, but markets have yet to respond positively as we have not yet, outside the U.K.’s budget yesterday, seen the fiscal response which is expected. The market remains focused on the short-term cash flow problems that the economic lockdowns will create and debt markets are pricing in a deterioration of credit quality and rise in defaults and downgrades. For companies with strong balance sheets, this provides good opportunities for long-term investors, and for companies with weak balance sheets they should grab the loans while they can. I expect stronger and more coordinated fiscal measures to be deployed soon.”

--With assistance from Michael Msika, Jan-Patrick Barnert, Lisa Pham, Albertina Torsoli and Sam Unsted.

To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Paul Jarvis

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