Italy, Spain ban short selling as euro and shares tumble
SPAIN and Italy reintroduced bans on short selling yesterday to discourage speculative trading after stock markets fell steeply in response to fears that Spain might need a full-blown bailout. The two countries had both banned short-selling last year when markets were also volatile, but they had lifted the bans in February.
"Given extreme volatility in European stock markets that could disturb the orderly functioning of financial activity, it is necessary to review stock markets' operations in order to ensure financial stability," Spain's stock market regulator CNMV said in a statement.
It said its decision to ban short selling had followed the ban by Italy, where regulator Consob said it was being reinstated because of the current situation affecting financial markets.
French regulator AMF, which has banned short selling in the past, said it had no plans to follow suit.
Fears that Spain may need a full sovereign bailout triggered a broad sell-off on European shares, with the Italian and Spanish blue-chip indexes falling more than 5pc to a record low before recovering.
Stock markets across Europe had a horrendous day.
The ISEQ closed down 2.3pc, or 73.68 points, to 3,132.32. That was the index's biggest percentage drop since May 5.
The Stoxx Europe 600 tumbled 2.5pc. The UK's FTSE 100 plunged 2.1pc, while Frankfurt's DAX slumped 3.2pc.
The CAC 40 in Paris dived 2.9pc. Greece's ASE sank 7.1pc, its biggest loss since 2008. Spain's IBEX 35 dropped 1.1pc and Italy's FTSE MIB slid 2.8pc.
The euro has also dropped to a near 12-year trough against the yen and investors are rushing into the perceived haven of US Treasuries, pushing yields to all-time lows, as fears mount that Spain may be the next eurozone member to need a bailout.