Sentiment further hit by Chancellor's comments on euro and demands for tough action on speculators.
The Independent, 20 May 2010
Financial markets around the world shuddered yesterday after Germany's surprise decision to ban so-called "naked" short-selling of shares was followed by a warning that the euro was "in danger" by German Chancellor Angela Merkel.
The move sparked a panic, wiping billions from the value of shares while the euro hit a four-year low against the dollar, dipping beneath $1.215 before later recovering to $1.232. Said one trader: "The feeling is, what do they know that we don't?"
That sentiment led to a stampede for safety that wiped 149.26 points from the FTSE 100, which closed at 5158.08, a fall of 2.81 per cent. Germany's main stock index, the DAX, lost 2.72 per cent while the CAC 40 in France fell by 2.92 per cent. The sell-off was also felt on the other side of the Atlantic. The Dow Jones Industrial Average was at 10391.54, down -119.41 points or 1.14 per cent, by lunch time in New York.
But bond prices rose on the news, which meant that yields fell and the cost of borrowing to Germany and even to Britain, decreased. Ten-year UK government bond yields moved down 6 basis points from 3.69 per cent to 3.63 per cent. German debt reacted in the same way with 10-year bund yields falling by 8 basis points from 2.82 per cent to 2.74 per cent.
