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Debt crisis: Spain and Italy ban short-selling
Spanish and Italian regulators banned the short-selling of financial stocks on Monday after stock markets fell sharply on fears that might need a full international debt bailout.
"The situation of extreme volatility across the European markets could interfere with their smooth functioning and the normal course of their activities," the Spanish regulator said in a statement.
Spain has banned short selling for three months until October 23 to "maintain stability". The ban could be shortened or increased, as necessary, the regulator said.
Italy reintroduced a temporary ban on the short selling of financial stocks for this week.
In mid-afternoon trade, Madrid's Ibex was down around 3pc, having lost some 5pc earlier after tumbling nearly 6pc on Friday while other European bourse were all under heavy pressure. Italy's FTSE MIB fell 3.5pc after failing as much as 4.5pc in the morning.
In February, Spain lifted a ban on short-selling which had been introduced in August 2011 at the height of the market turmoil sparked by tough talks on a second massive bailout accord for Greece.
Short sellers bet that a stock will fall in price. They borrow the stock from a broker, sell it and then buy it back later at a hopefully cheaper price to pocket the difference. Supporters claim short-selling allows investors a hedge against risk but critics say it only adds to the downward pressure in falling markets and serves no real purpose beyond speculative trading for short-term profit.
Supporters claim short-selling allows investors a hedge against risk but critics say it only adds to the downward pressure in falling markets and serves no real purpose beyond speculative trading for short-term profit.
The yield on Spanish government 10-year bonds hit a new euro-era record of 7.5pc on Monday on fears that one of the eurozone's biggest economies might need a full-blown sovereign bailout.
Investors' concerns were not allayed by Luis de Guindos, the Spanish Economy Minister, who said Spain did not need a full sovereign rescue package such as the ones taken by Greece, Ireland and Portugal to stay afloat.
"Given the market reaction on the back of the news that more and more regions are looking to tap in to the liquidity fund ... it will be very difficult for Spain to circumvent further support for itself," said Norbert Aul, a rate strategist at RBC Capital Markets.
The FTSE 100 was trading 2.3pc down at 2.42pm, after Wall Street opened down sharply. The Dow Jones dropped over 200 points - or 1.7pc - to 12.602.111 points in early trading, with the S&P 500 and Nasdaq sliding 0.8pc and 2.5pc respectively.
France's CAC-40 fell 2.9pc and Germany's DAX tumbled 3.6pc.
In Asia earlier, Hong Kong's Hang Seng dropped 2.8pc, while Tokyo's Nikkei 225 shed 1.9pc, Australia's ASX Sydney slipped 1.7pc, South Korea's Kospi lost 1.8pc and China's Shanghai Composite slid 1.3pc.
Markets were spooked by reports that Murcia became the second indebted Spanish region after Valencia to ask the central government for financial support, while officials in Madrid warned that the economy would likely contract through 2013.
Concerns also mounted again over Greece with international lenders scheduled to gather in Athens to discuss the terms of further rescue payments, after its prime minister said the country was now mired in a "Great Depression".
"Europe is definitely a drag on risk assets again this week as investors are worried that Spain's debt burden could be bigger than expected and that a full bailout may be required," said Peter Esho at CityIndex in Australia.
European leaders on Friday agreed to grant Spain's banks bailout cash of up to 100bn but despite this there are fears that the country will need extra cash to help service its debts.
The soaring yields on 10-year bonds come as unemployment sits at 24pc and the government tries to implement further austerity measures.
Spain's economy sank deeper into recession in the second quarter, the Bank of Spain said on Monday. The economy contracted by 0.4pc in the three months from April to June, having shrunk 0.3pc in the first quarter.
Ministers in Madrid insist there is little more they can do to bring the borrowing costs down, but the central bank's deputy governor Fernando Restoy said more austerity was needed.
He said after a conference in Madrid that turmoil in the markets "reflect problems in Spain as well as the eurozone", adding: "We need to continue further along the same line. We need more cuts, more reforms which will restore market confidence and mechanisms which will strengthen the monetary union."
Without better economic news the country could lose access to debt markets, leading it to a bailout, which some analysts have said could cost up to $500bn.
Mr De Guindos will visit Berlin on Tuesday for talks with German Finance Minister Wolfgang Schaeuble, a spokeswoman for the German minister said on Monday, adding that Berlin knew of no plans for a broader Spanish bailout request.
"We believe that the reforms already begun by Spain will help calm the markets," said Marianne Kothe, adding that financing problems reported by Spanish regions had "nothing to do with" an agreement to bail out Spain's banks.
The euro fell against the dollar and the yen.
Debt crisis: Spain and Italy ban short-selling - Telegraph
Spanish and Italian regulators banned the short-selling of financial stocks on Monday after stock markets fell sharply on fears that might need a full international debt bailout.
"The situation of extreme volatility across the European markets could interfere with their smooth functioning and the normal course of their activities," the Spanish regulator said in a statement.
Spain has banned short selling for three months until October 23 to "maintain stability". The ban could be shortened or increased, as necessary, the regulator said.
Italy reintroduced a temporary ban on the short selling of financial stocks for this week.
In mid-afternoon trade, Madrid's Ibex was down around 3pc, having lost some 5pc earlier after tumbling nearly 6pc on Friday while other European bourse were all under heavy pressure. Italy's FTSE MIB fell 3.5pc after failing as much as 4.5pc in the morning.
In February, Spain lifted a ban on short-selling which had been introduced in August 2011 at the height of the market turmoil sparked by tough talks on a second massive bailout accord for Greece.
Short sellers bet that a stock will fall in price. They borrow the stock from a broker, sell it and then buy it back later at a hopefully cheaper price to pocket the difference. Supporters claim short-selling allows investors a hedge against risk but critics say it only adds to the downward pressure in falling markets and serves no real purpose beyond speculative trading for short-term profit.
Supporters claim short-selling allows investors a hedge against risk but critics say it only adds to the downward pressure in falling markets and serves no real purpose beyond speculative trading for short-term profit.
The yield on Spanish government 10-year bonds hit a new euro-era record of 7.5pc on Monday on fears that one of the eurozone's biggest economies might need a full-blown sovereign bailout.
Investors' concerns were not allayed by Luis de Guindos, the Spanish Economy Minister, who said Spain did not need a full sovereign rescue package such as the ones taken by Greece, Ireland and Portugal to stay afloat.
"Given the market reaction on the back of the news that more and more regions are looking to tap in to the liquidity fund ... it will be very difficult for Spain to circumvent further support for itself," said Norbert Aul, a rate strategist at RBC Capital Markets.
The FTSE 100 was trading 2.3pc down at 2.42pm, after Wall Street opened down sharply. The Dow Jones dropped over 200 points - or 1.7pc - to 12.602.111 points in early trading, with the S&P 500 and Nasdaq sliding 0.8pc and 2.5pc respectively.
France's CAC-40 fell 2.9pc and Germany's DAX tumbled 3.6pc.
In Asia earlier, Hong Kong's Hang Seng dropped 2.8pc, while Tokyo's Nikkei 225 shed 1.9pc, Australia's ASX Sydney slipped 1.7pc, South Korea's Kospi lost 1.8pc and China's Shanghai Composite slid 1.3pc.
Markets were spooked by reports that Murcia became the second indebted Spanish region after Valencia to ask the central government for financial support, while officials in Madrid warned that the economy would likely contract through 2013.
Concerns also mounted again over Greece with international lenders scheduled to gather in Athens to discuss the terms of further rescue payments, after its prime minister said the country was now mired in a "Great Depression".
"Europe is definitely a drag on risk assets again this week as investors are worried that Spain's debt burden could be bigger than expected and that a full bailout may be required," said Peter Esho at CityIndex in Australia.
European leaders on Friday agreed to grant Spain's banks bailout cash of up to 100bn but despite this there are fears that the country will need extra cash to help service its debts.
The soaring yields on 10-year bonds come as unemployment sits at 24pc and the government tries to implement further austerity measures.
Spain's economy sank deeper into recession in the second quarter, the Bank of Spain said on Monday. The economy contracted by 0.4pc in the three months from April to June, having shrunk 0.3pc in the first quarter.
Ministers in Madrid insist there is little more they can do to bring the borrowing costs down, but the central bank's deputy governor Fernando Restoy said more austerity was needed.
He said after a conference in Madrid that turmoil in the markets "reflect problems in Spain as well as the eurozone", adding: "We need to continue further along the same line. We need more cuts, more reforms which will restore market confidence and mechanisms which will strengthen the monetary union."
Without better economic news the country could lose access to debt markets, leading it to a bailout, which some analysts have said could cost up to $500bn.
Mr De Guindos will visit Berlin on Tuesday for talks with German Finance Minister Wolfgang Schaeuble, a spokeswoman for the German minister said on Monday, adding that Berlin knew of no plans for a broader Spanish bailout request.
"We believe that the reforms already begun by Spain will help calm the markets," said Marianne Kothe, adding that financing problems reported by Spanish regions had "nothing to do with" an agreement to bail out Spain's banks.
The euro fell against the dollar and the yen.
Debt crisis: Spain and Italy ban short-selling - Telegraph
