Short-Selling Ban in Europe

European and North American markets increased following a short-selling ban in Europe that helped Stoxx Europe 600 Index to overcome a two-year low the index hit during the week. Belgium, France, Italy, and Spain were among the countries that imposed a short-selling ban in Europe boosting stock trading and providing support for banking shares in Europe.

Short Sell Ban

The short-selling ban in Europe was introduced after Societe Generale SA saw its shares hit a two-year low yesterday, and drastic measures were required to calm the markets down and support stocks of European banking institutions. All major European stock indexes reacted positively to the short-selling ban with London’s FTSE 100 Index growing by 2.2 percent. Frankfurt’s Stock Exchange DAX Indexx added 2.7 percent, while French CAC 40 Index climbed 3 percent in a single day. According to the European Securities and Markets Authority, the ban was imposed to prevent speculators from benefiting by spreading false rumors or to achieve a regulatory level playing field.

A meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel is scheduled for August 16 in Paris, where the leaders of Europe’s leading economies are set to discuss concerns that sovereign-debt crisis could cause stagnation and financial turmoil in France and Germany. The two countries are considered the main driving forces of European Union’s economic prosperity and possible financial and economic troubles can jeopardize EU’s overall economic development. Latest economic data, however, shows sends neutral signals in regard to economic situation in France and Germany, which is encouraging to some extent, economists commented.


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