* Global stocks fall on Germany's short-selling ban
* Euro rallies after earlier slumping to 4-year low
* Bond prices slip as euro's bounce damps safety bid
* Oil drops to $69 a barrel on higher U.S. stockpiles
(Updates with U.S. markets, changes byline, dateline, previous
LONDON)
By Herbert Lash and Claire Milhench
NEW YORK/LONDON, May 19 (Reuters) - The euro rallied
strongly on speculation related to the European Central Bank on
Wednesday but equity markets on both sides of the Atlantic
remained lower due to Germany's move to ban some naked short
sales of stocks and bonds.
Despite a 1.0 percent bounce in the euro, assets perceived
as being risky mostly fell in price as concerns that Germany's
move heralded tighter financial regulation, boosting risk
aversion.
Crude oil slid to $69 a barrel and gold prices shed about 2
percent. Key euro and U.S. dollar interbank lending rates
pushed higher after German Chancellor Angela Merkel said the
euro was in danger. For details see: []
[] []
European stocks lost ground for the third time in four
sessions as Germany's move to ban some naked short sales sent
shockwaves across financial markets, pushing the euro to a
four-year low before it rebounded. []
The euro <EUR=> was rose to $1.2308 after sliding to a
session low of $1.2146.
The MSCI all-country world equity index <.MIWD00000PUS> was
down 1.6 percent, while the more volatile emerging markets
index <.MSCIEF> fell 3.0 percent.
The Dow Jones industrial average <> was down 82.98
points, or 0.79 percent, at 10,427.97. The Standard & Poor's
500 Index <.SPX> was down 7.66 points, or 0.68 percent, at
1,113.14. The Nasdaq Composite Index <> was down 20.57
points, or 0.89 percent, at 2,296.69.
Investors reacted to any market rumor, such as intervention
in currency markets or unscheduled meetings of ECB monetary
authorities. The sharp moves suggested traders are waiting for
any sign that the euro may have reached a short-term bottom.
"Euro is popping all over as talk is going around that the
ECB may be considering intervention," said Brian Dolan, chief
strategist at Forex.com in Bedminster, New Jersey.
Germany banned risky bets on bonds, stocks and credit
protection in a tentative crack down on speculative trading,
which has been widely blamed by leaders for exacerbating the
euro zone debt crisis.
The decline in oil prices for a third day followed
Tuesday's report from industry group the American Petroleum
Institute showing crude inventories at the storage hub at
Cushing, Oklahoma, rose to a record high.
"It's all financial markets-driven," said Carsten Fritsch,
commodities analyst at Commerzbank. "The news regarding
short-selling was quite surprising and it led to a rapid
strengthening of the U.S. dollar and falling equity markets,
and this affects commodity prices."
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
1/32 in price to yield at 3.35 percent but the 2-year U.S.
Treasury note <US2YT=RR> was down 2/32 in price to yield 0.75
percent.
The dollar was down against a basket of major currencies,
with the U.S. Dollar Index <.DXY> off 0.56 percent at 86.676.
Against the yen, the dollar <JPY=> was down 0.76 percent at
91.42.
U.S. light sweet crude oil <CLc1> fell 40 cents to $69.01 a
barrel.
Spot gold prices <XAU=> fell $25.95 to $1,194.70 an ounce.
The MSCI index of Asia-Pacific shares outside of Japan
<.MIAPJ0000PUS> dropped over 3 percent, while Japan's Nikkei
average <> closed down 0.5 percent, its weakest finish in
11 weeks.
(Reporting by Nick Olivari and Ellen Freilich in New York and
Alex Lawler and Jan Harvey in London; Writing by Herbert Lash)
