From Reuters: Spain and Italy reintroduced bans on short
selling on Monday 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.
The 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 5 percent to a record low before
recovering. Italian banks and insurance
companies are under heavy pressure as Spain's woes drive Italian bond yields
higher, depressing the value of the government bond portfolios held by Italian
banks and insurers……
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