News / Europe

German Ban on Risky Investments Rattles Financial Markets

Multimedia

Germany's decision this week to ban speculative short selling of certain types of financial instruments has rattled financial markets around the world, further weakening the euro.  The 16-nation currency, which has been battered by continuing concerns about the European debt crisis, fell to a four-year low on Wednesday.  Although the euro bounced back slightly, analysts say comments by German Chancellor Angela Merkel, to justify the measure, only made matters worse.  

World stock prices fell on Wednesday after Germany approved new regulations to limit speculative selling of euro-dominated government bonds.

Analyst Robert Halver of Germany's Baaderbank says the move caught many investors off guard. "For the markets right now, it is a shock because everybody is waiting to see what can come next because such a shocking effect, to do it overnight, is not good for a market which is keen on transparency," he said.

The ban applies to a type of transaction known as "naked short-selling."  In regular short-selling, traders borrow assets and sell them at a set price, hoping they can make a profit by buying them later at a lower price.  In naked short-selling, the bets are made on assets that are neither borrowed nor owned by the investor.

Investment strategist Dariusz Kowalczyk of CFC Seymour, Ltd. in Hong Kong. "In particular, speculators cannot sell them if they do not own them.  And as a result, stock markets in the U.S. fell sharply because investors are afraid that there is more regulatory risk in the financial system.  And whenever there is more risk, equity markets decline," he said.

Some economists blame speculative transactions such as "naked short selling" for plunging the world economy into a financial crisis.  Similar investments against the euro are also blamed for pushing the European currency to its lowest level in four years.

In a speech before the German parliament, Chancellor Angela Merkel defended the new regulations on what she called "destructive" behavior by financial markets.  "If the euro fails, then Europe fails.  But if we are able to anticipate this danger, then the euro and Europe will be stronger than before," he said.

Analysts say the new regulations, aimed at maintaining financial stability in Europe, helped push the value of the euro to $1.21 before rebounding slightly.  The euro has fallen more than 11 cents this month.

You May Like

Photogallery US to Send 3,000 Troops to Liberia in Expanded Ebola Effort

At US Centers for Disease Control and Prevention in Atlanta, Obama is to announce troop deployment, other details of US plans to fight Ebola outbreak More

China Muslims Work to Change Perceptions After Knife Attacks

Muslims in Kunming say that they condemn the violence, it is not a reflection of the true beliefs of their faith More

Humanitarian Aid, Equipment Blocked in Cameroon

Move is seen as a developing supply crisis in West Africa More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Enviropreneur Seeks to Save the Environment, Empower the Communityi
X
September 16, 2014 2:06 PM
Lorna Rutto, a former banker, is now an ‘enviropreneur’ - turning plastic waste into furniture and fences discusses the challenges she faces in Africa with raw materials and the environment.
Video

Video Enviropreneur Seeks to Save the Environment, Empower the Community

Lorna Rutto, a former banker, is now an ‘enviropreneur’ - turning plastic waste into furniture and fences discusses the challenges she faces in Africa with raw materials and the environment.
Video

Video West Trades Accusations Over Ransoms

As world leaders try to forge a common response to the threat posed by Islamic State militants in Iraq and Syria, there is simmering tension over differing policies on paying ransoms. In the past month, the jihadist group has beheaded two Americans and one Briton. Both countries refuse to pay ransom money. As Henry Ridgwell reports for VOA from London, there is uncertainty in the approach of some other European nations.
Video

Video Scotland Independence Bid Stokes Global Interest

The people of Scotland are preparing to vote on whether to become independent and break away from the rest of Britain, in a referendum being watched carefully in many other countries. Some see it as a risky experiment; while others hope a successful vote for independence might energize their own separatist demands. Foreign immigrants to Scotland have a front row seat for the vote. VOA’s Henry Ridgwell spoke to some of them in Edinburgh.
Video

Video Washington DC Mural Artists Help Beautify City

Like many cities, Washington has a graffiti problem. Buildings and homes, especially in low-income neighborhoods, are often targets of illegal artwork. But as we hear from VOA’s Julie Taboh, officials in the nation's capital have come up with an innovative program that uses the talents of local artists to beautify the city.
Video

Video US Muslim Leaders Condemn Islamic State

Leaders of America's Muslim community are condemning the violent extremism of the Islamic State group in Iraq and Syria. The U.S. Muslim leaders say militants are exploiting their faith in a failed effort to justify violent extremism. VOA correspondent Meredith Buel reports.
Video

Video Americans' Reaction Mixed on Obama Strategy for Islamic State Militants

President Barack Obama’s televised speech on how the United States plans to “degrade and destroy” the group known as the Islamic State reached a prime-time audience of millions. And it came as Americans appear more willing to embrace a bolder, tougher approach to foreign policy. VOA producer Katherine Gypson and reporter Jeff Seldin have this report from Washington.
Video

Video Authorities Allege LA Fashion Industry-Cartel Ties

U.S. officials say they have broken up crime rings that funneled tens of millions of dollars from Mexican drug cartels through fashion businesses in Los Angeles. Mike O'Sullivan reports that authorities announced nine arrests, as 1,000 law enforcement agents fanned out through the city on Wednesday.
Video

Video Bedouin Woman Runs Successful Business in Palestinian City

A Bedouin woman is breaking social taboos by running a successful vacation resort in the Palestinian town of Jericho. Bedouins are a sub-group of Arabs known for their semi-nomadic lifestyle. Zlatica Hoke says the resort in the West Bank's Jordan Valley is a model of success for women in the region.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid