EU states extend ban on shorting

Julian Harris
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FOUR European Union states yesterday extended their short-selling bans until at least the end of next month.

Spain and Italy will persist with the measure until 30 September, while French and Belgian bans will continue until further notice.

The German DAX fell as much as five per cent at one stage, on rumours of both a short selling ban in the Eurozone’s prime economy and a downgrade for its government’s debt.

Yet the DAX pared losses to close down 1.7 per cent as both rumours were dismissed as without substance.

Meanwhile, US stocks slipped ahead of Federal Reserve chief Ben Bernanke’s Jackson Hole speech today.

The Dow Jones industrial average closed down 1.51 per cent last night, also hindered by weak employment data. Initial claims for state unemployment benefits rose 5,000 to a seasonally adjusted 417,000, the US Labor Department said.

Investors remain uncertain as to whether or not Bernanke will use today’s speech to pave the way for yet another wave of quantitative easing.

The Fed could also opt for “Operation Twist”, an effort to flatten the yield-curve by buying long-term Treasuries while issuing short-term bills, analysts have speculated.

Bernanke’s speech is not an official Fed policy statement, yet last year it included strong hints towards the impending programme of QE2.

Gold bounced back yesterday from its sharp dip earlier in the week, gaining over 0.6 per cent to reach $1,774 an ounce.

Despite the market jitters, senior Federal Reserve official Thomas Hoenig yesterday said that the US is not on course for another recession.