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

EU Court Fines Poland for Hosting CIA 'Black Sites'

Ruling is first time a court has acknowledged suspects were held and tortured at the sites, under US program launched following the 9/11 terrorist attacks More

Migrant Issues Close to Home Spur Groups to Take Action

Groups placing water, food in the desert, or aiding detainees after release, have one common goal: no more deaths of migrants crossing illegally into the US More

Video At AIDS Conference, Prevention Pill Stirs Excitement

Truveda shows promise, spurring debate over access and other approaches 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.
Israel Targets Gaza Supply Tunnelsi
X
July 24, 2014 4:42 AM
The Israeli military has launched a ground operation in Gaza to destroy the myriad tunnels that may have been used to smuggle weapons to Hamas. VOA's Zlatica Hoke reports that could mean more hardship for the people of Gaza, who obtain some of their essential supplies through these underground passages
Video

Video Israel Targets Gaza Supply Tunnels

The Israeli military has launched a ground operation in Gaza to destroy the myriad tunnels that may have been used to smuggle weapons to Hamas. VOA's Zlatica Hoke reports that could mean more hardship for the people of Gaza, who obtain some of their essential supplies through these underground passages
Video

Video MH17's 'Black Boxes' Could Reveal Crash Details

The government of Malaysia now has custody of the cockpit voice and flight data recorders from Malaysia Airlines Flight 17, which was hit by a missile over Ukraine before crashing last week. As VOA's Carolyn Presutti reports, the so-called black boxes may hold information about the final minutes of the flight.
Video

Video Living in the Shadows Panel Discussion

Following a screening of the new VOA documentary, "AIDS - Living in the Shadows," at the World AIDS conference in Melbourne, a panel discussed the film and how to combat the stigma associated with HIV/AIDS.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video Relic of Saint Draws Catholics Worried About Immigration Issue

A Roman Catholic saint who is a figure of devotion for those crossing the border into the United States is attracting believers concerned about the plight of undocumented immigrants. Mike O'Sullivan reports from Los Angeles, where a relic of Saint Toribio has drawn thousands to local churches.
Video

Video US Awards Medal of Honor for Heroics in Bloodiest of Afghan Battles

U.S. combat troops are withdrawing from Afghanistan, on pace to leave the country by the end of this year. But on Monday, U.S. President Barack Obama took time to honor a soldier whose actions while under fire in Afghanistan earned him the Medal of Honor. VOA's Jeff Seldin has more from the Pentagon.
Video

Video Ukraine Rebels Surrender MH17 Black Boxes

After days of negotiations, a senior separatist leader handed over two black boxes from an airliner downed over eastern Ukraine to Malaysian experts early Tuesday. While on Monday, the U.N. Security Council unanimously demanded that armed groups controlling the crash site allow safe and unrestricted access to the wreckage.
Video

Video In Cambodia, HIV Diagnosis Brings Deadly Shame

Although HIV/AIDS is now a treatable condition, a positive diagnosis is still a life altering experience. In Cambodia, people living with HIV are often disowned by friends, family and the community. This humiliation can be unbearable. We bring you one Cambodian woman’s struggle to overcome a life tragedy and her own HIV positive diagnosis.

AppleAndroid