German ban drags European shares lower; banks slip

                                
 * FTSEurofirst 300 index falls 2.3 percent
                                
 * Banks, commodity stocks fall on German short-selling ban
                                
 * For up-to-the minute market news, click on [STXNEWS/EU]
By Joanne Frearson
                                
 LONDON, May 19 (Reuters) - European shares fell sharply on
Wednesday morning, hit by concerns over tighter regulation after
Germany banned naked short-selling of some bonds, stocks and
credit protection, with banking stocks the top losers.
                                
 Analysts said there was concern the ban would restrict the
ability of markets to manage risk and hedge positions.
                                
 A broader euro zone-wide ban could result in funds and
business draining away from Frankfurt to London and other global
financial centres, they said.
                                
 By 0942 GMT, the pan-European FTSEurofirst 300 <.FTEU3>
index of top shares was down 2.3 percent at 1,003.22 points,
having set a low at 997.12.
                                
 That was the first time the index had fallen below the 1,000
level since the announcement of a 750 billion euro ($930
billion) emergency debt package to stabilise the euro.
                                
 The index, which gained nearly 26 percent in 2009, is now
down 4.1 percent for the year amid concern about euro zone
sovereign debt.
                                
 The STOXX Europe 600 banking index <.SX7P> <0#.SX7P> fell 3
percent following a rebound in the previous session.
                                
 Germany imposed the ban after the market closed on Tuesday,
to fight financial speculation which it blames for much of
Europe debt crisis. [ID:nSGE64I073]
                                
 "Investors are somewhat spooked," said Stephen Pope, chief
global equity strategist at Cantor Fitzgerald. "The worry is
whether other markets will try and copy."
                                
 News that several Republicans in the United States will vote
with Democrats to wrap up a debate on the sweeping reform of
financial regulations and move toward final passage, added to
market jitters. [ID:nN16148428]
                                
 
                                
 COMMODITIES WEIGH
                                
 Commodity stocks <0#.SXPP> were also hammered as investors
appetite for riskier assets dampened on concern as to what the
tighter regulation would mean for the prospects of global
recovery.
                                
 Crude <CLc1> fell 1.6 percent and metal prices slipped, with
copper <MCU3=LX> down 1.7 percent.
                                
 Energy groups BG Group <BG.L> and Total <TOTF.PA> fell 2.1
and 2.3 percent respectively.
German Chancellor Angela Merkel said the euro was in danger,
sparking concern Germany was panicking about the currency's fall
to a four-year low against the dollar <EUR=>. [ID:nBAT005472]
                                
 Germany's DAX <.GDAXI> was down 2.4 percent, in line with
the broader market, the FTSE 100 <.FTSE> index fell 2.4 percent,
and France's CAC 40 <.FCHI> lost 2.9 percent.
                                
 Spain's IBEX <.IBEX> lost 3.5 percent, Portugal's PSI 20
<.PSI20> fell 2.2 percent and Italy's FTSE MIB <.FTMIB> was down
3.7 percent.
 (Editing by Dan Lalor)
 ($1 = 0.8054 euro)