FTSE falls sharply on German short-selling ban

* FTSE 100 down 2.8 pct

* Commodities, banks slide as risk appetite wanes

* U.S. market extend losses; weak mortgage data

By David Brett

LONDON, May 19 (BestGrowthStock) – Britain’s top shares fell steeply
on Wednesday, as commodity-linked stocks and banks were hit by
Germany’s attempt to stop speculators driving down the euro,
bonds and share prices by limiting short-selling.

The FTSE 100 (.FTSE: ) was down 149.26 points, or 2.8 percent,
at 5,158.08, having added 0.9 percent on Tuesday, as Germany’s
move shook markets across the globe, leaving investors uncertain
as to whether other countries might follow suit.

Germany banned naked short sales of euro-denominated
government bonds, credit default swaps based on those bonds and
shares in the country’s 10 leading financial institutions in a
move that appeared to catch its partners in the European Union
off guard. [ID:nSGE64I073] [ID:nLDE64I0SO]

Commodity-linked equities dropped as investors took money
out of risk-sensitive sectors. Miners Rio Tinto (RIO.L: ), Xstrata
(XTA.L: ), Lonmin (LMI.L: ), Kazakhmys (KAZ.L: ) and BHP Billiton
(BLT.L: ) fell 5.4 to 7.5 percent.

Energy stocks were lower as crude fell below $69 per barrel,
with BG Group (BG.L: ), BP Group (BP.L: ) and Royal Dutch Shell
(RDSa.L: ) down 2-2.5 percent.

The FTSE 100, whose weighting is dominated by commodities
and banks, is down 4.7 percent on the year and 12 percent off
its 2010 high hit in mid-April, weighed by fears over the euro
zone.

“Global equity markets are in a fragile situation,” said
Geoff Wilkinson, head of research at Mint.

He said 5,120 is a key support level for the blue-chip index
— just 0.7 percent below the current level.

U.S. CONCERN

The U.S. Dow Jones Industrial Average (.DJI: ) and the S&P 500
(.GSPC: ) fell for a second consecutive session as the moves by
Germany weighed on sentiment.

“We are at quite pivotal levels in the U.S. … once you
lose a few key support levels that in itself contains further
downside risks to Europe,” Wilkinson said.

Confidence took another knock when demand for loans to buy
U.S. homes shrivelled to a 13-year low last week.
[ID:nN19225369]

In the UK, risk-sensitive banks were also lower. Barclays
(BARC.L: ), HSBC (HSBA.L: ), Royal Bank of Scotland (RBS.L: ) and
Lloyds Banking Group (LLOY.L: ) fell 1.9-5.1 percent.

The VDAX-NEW volatility index (.V1XI: ), a gauge of investor
risk appetite or aversion, jumped 21 percent after Germany’s
announcement. The higher the volatility the lower investors’
appetite for risk is.

ICAP (IAP.L: ), the world’s biggest interdealer broker, fell
4.2 percent, paring Tuesday’s gains as it reported a good start
to its financial year, but with investors wary of what impact
any further trading regulations may have on business.

Home Retail (HOME.L: ), which lost its dividend attraction on
Wednesday, dropped 7.4 percent. Its shares were also weighed
down by UBS which downgraded its rating and cut its forecasts on
the owner of Argos and Homebase, citing potential threats to
earnings and the spectre of mergers or acquisitions waning.

British credit information firm Experian (EXPN.L: )
outperformed the wider UK market, falling 0.5 percent after
upping its dividend and topping forecasts with its results.

Defensive stocks generally fared better with drugmaker
GlaxoSmithKline (GSK.L: ) the only riser on the index up 0.4
percent.

Growth Stocks

(Editing by Erica Billingham)

FTSE falls sharply on German short-selling ban