FOUR key Eurozone nations are to ban short selling of financial stocks for at least 15 days in a bid to halt the turmoil engulfing markets.

Europe’s financial markets watchdog said France, Italy, Belgium and Spain would impose the ban from today to combat the volatility hitting banks such as France’s Societe Generale.

Despite claims that the bans were harmonised, France’s ban covered only the shorting of bank equities, but Spain’s included all financial instruments such as credit default swaps.

The European Securities and Markets Authority also delivered a warning shot against the plague of rumours behind a mass sell-off of shares across Europe this week, with a reminder that spreading misleading information was also banned.

“Esma will support national authorities to act swiftly against any such behaviour which is clearly punishable,” it said in a statement. “While short­selling can be a valid trading strategy, when used in combination with spreading false market rumours this is clearly abusive.”

But Esma has been unable to coordinate a Europe-wide ban, and does not yet have the power to force national regulators to implement one.

The Financial Services Authority made it clear it would not follow suit in the UK, saying it “has no plans to introduce a short selling ban”.

Traders warned a ban would not help, as seen in 2008 when UK and US bans failed to stop panic selling.

The news followed a late turnaround in markets at the end of another rocky day in which investors remained deeply sensitive to Eurozone news.

French banks were kept under pressure on fears for their exposure to risky government debt, with SocGen briefly dropping eight per cent.

Its chief executive Frederic Oudea was forced into a furious denial of rumours surrounding its solvency and said the French financial regulator would hunt down the source.

Solvency fears intensified after it emerged that banks drew more than €4bn (£2.5bn) in emergency overnight loans from the European Central Bank on Wednesday.

But French president Nicolas Sarkozy set off a late rally by saying talks were scheduled with German chancellor Angela Merkel to try to ease the ongoing volatility next week.

Ironically, markets gained ground on rumours that a Europe-wide short selling ban could be brought in. France’s CAC 40 closed up 2.9 per cent and the FTSE 100 jumped 3.1 per cent.