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French Market Regulator Warns Against Rumors

A broker speaks on the phone in a trading room in Paris, August 11, 2011

A broker speaks on the phone in a trading room in Paris, August 11, 2011

France's market authority has warned that unfounded rumors are unsettling the stock market, causing bank shares to plummet.

The AMF securities regulator Thursday announced a ban on short-selling on select stocks and warned of possible penalties for spreading wrong information and profiting from it. Short selling is profiting from bets on the decline in a share price. It has been blamed for contributing to market volatility.

German Chancellor Angela Merkel and French President Nicolas Sarkozy are planning to meet Thursday to see if they can craft a plan to contain the spread of Europe's governmental debt and improve financial management in the 17-nation bloc that uses the common euro currency.

Mr. Sarkozy's office said that the two leaders hope to produce "joint proposals" by September on how they can better manage the euro and stem the turmoil that has rocked the continent's major stock exchanges this week. Mrs. Merkel's spokesman said the meeting would look at suggestions on how to improve economic policy and crisis management across the continent.

World stock markets have been volatile in the last four days, with alternating days of massive losses and huge gains at the most prominent exchanges.

In part, the volatile trading has been sparked by the first-ever credit rating downgrade for the United States, but also by investors' continued worries that Italy and Spain might need international bailouts after those already secured by Greece, Ireland and Portugal. Investors also voiced fears that France's AAA credit rating could be cut, even though three major credit rating companies affirmed it and the French government has vowed to adopt new austerity measures.

Major European stock markets in London, Paris and Frankfurt all rallied sharply on Thursday.

Some information for this report was provided by AFP and AP.