Europe shares sink as German ban rattles investors

* FTSEurofirst 300 down 2.4 pct, drops below 1,000 pts

* Germany’s move on short selling hits stocks, euro, commods

* Milan’s MIB index sags 3.6 pct, Madrid’s IBEX down 3.3 pct

* Lagarde says France won’t follow Germany on ban

* For up-to-the-minute market news, click on [STXNEWS/EU]

By Blaise Robinson

PARIS, May 19 (BestGrowthStock) – European stocks sank 2.4 percent
by midday Wednesday, losing ground for the third time in four
sessions, as Germany’s move to ban some naked shorting sent
shockwaves across markets, pushing the euro to a four-year low.

In a surprise move late on Tuesday, Germany banned risky
bets on bonds, stocks and credit protection in a tentative crack
down on speculative trading, which has been widely blamed by
leaders for exacerbating the euro zone debt crisis.

At 1100 GMT, the FTSEurofirst 300 (.FTEU3: ) index of top
European shares was down 2.4 percent at 1,002.24 points,
bringing the index’s retreat since the euro zone debt fears
escalated in mid-April to 10 percent.

Earlier in the session, Europe’s benchmark index dropped
below the 1,000 mark for the first time since a 750 billion euro
($930 billion) bailout package aimed at preventing the Greek
debt crisis from spreading was unveiled earlier this month.

Southern European indexes were hit particularly hard, with
Spain’s IBEX (.IBEX: ) down 3.3 percent and Italy’s MIB (.FTMIB: )
down 3.6 percent.
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“Germany’s move is very confusing and simply devastating.
Instead of reducing volatility and risk, it’s adding fuel to the
fire and will spook foreign investors,” said David Thebault,
head of quantitative sales trading at Global Equities in Paris.

“If the goal is to centralise debt markets and make them
more transparent, fine, but Germany can’t do that alone and it’s
not something that can be done overnight.”

Investors were also rattled by a lack of cohesion in the
euro zone in efforts to tackle the debt crisis and calm markets.

NOT FOLLOWING

French Economy Minister Christine Lagarde said on Wednesday
France will not follow Germany in banning naked short-selling on
European debt.

A similar signal came from the Dutch financial markets
regulator AFM, which said it has no immediate plans to follow
Germany’s ban on naked short selling — selling securities such
as shares and bonds that are not owned or borrowed.

“The timing is disastrous. It really shows the lack of
political cohesion in the euro zone, and it brings strong
downward pressure on the euro,” said Cyril Beuzit, head of
interest rate strategy at BNP Paribas in London.

Banking stocks tumbled, with UniCredit (CRDI.MI: ) down 5.4
percent, Barclays (BARC.L: ) down 5.1 percent, Banco Santander
(SAN.MC: ) down 3.7 percent and Societe Generale (SOGN.PA: ) down
3.5 percent. The STOXX Europe 600 banks index (.SX7P: ) has
plummeted 17 percent since mid-April.

“The new plans are a result of the growing pressure in the
public to campaign against the financial sector. Of course, this
is just a placebo,” Close Brothers Seydler analyst Roger Peeters
said. “At the end of the day, retail investors who own shares in
a fund or a cash-value life insurance will pay this bill.”

Commodities were also knocked lower, with oil (CLc1: ) falling
to $68 a barrel and industrial metals sliding, sparking a
retreat in shares of heavyweight mining and energy shares. Rio
Tinto (RIO.L: ) and Xstrata (XTA.L: ) sank more than 6 percent.

Around Europe, the UK’s FTSE 100 index (.FTSE: ) was down 2.3
percent, Germany’s DAX index (.GDAXI: ) down 2.7 percent and
France’s CAC 40 (.FCHI: ) down 2.7 percent.

So far this year, the FTSE 100 has lost 4.2 percent, the DAX
is up 0.6 percent and the CAC is down 11 percent, while southern
European benchmark indexes have been hammered — with Spain’s
IBEX down 22 percent, Italy’s MIB (.FTMIB: ) down 16 percent,
Portugal’s PSI 20 (.PSI20: ) down 19 percent and Greece’s ATG
(.ATG: ) down 28 percent.

Stock Market Today

(Additional reporting by Raoul Sachs in Paris and Peter Starck
in Copenhagen; Editing by David Holmes)

Europe shares sink as German ban rattles investors