* Global stocks fall on Germany's short-selling ban
* Euro rallies after earlier slumping to 4-year low
* Bond prices shed earlier gains as stocks pare losses
* Front-month oil surges before close to settle higher
(Updates with close of U.S. markets)
By Herbert Lash
NEW YORK, May 19 (Reuters) - The euro soared on speculation
it had hit a short-term low on Wednesday but equity markets
slid worldwide after Germany's move to ban some stock and bond
trades unsettled investors.
The euro rose from a four-year low to notch its best
one-day gain in more than a year as assets perceived as risky
fell in price on concerns the German ban heralded tighter
financial regulation, boosting risk aversion.
Traders bought the euro on speculation European monetary
officials may act to support the single currency, lifting it
from a session low -- $1.2143 -- last seen in April 2006. For
details see: ID:nN19583073
The euro EUR=> gained 1.72 percent to $1.239.
Longer-dated U.S. crude oil prices slid, gold dropped below
$1,190 an ounce and industrial metal prices slumped as the
German move fanned concerns about growth prospects in Europe.
Wall Street joined a wave of worldwide equity markets that
fell after Germany's move on Tuesday triggered a sell-off in
industrial shares, which have a heavy exposure to Europe.
"The markets never like governments interfering in what
they regard as the efficient running of markets," said Bill
McNamara, an analyst at Charles Stanley in Sweden.
"It just doesn't settle the nerves in the way politicians
seem to think it will. Investors should continue to expect high
levels of volatility," he said.
The MSCI all-country world equity index .MIWD00000PUS was
down 1.7 percent, while the more volatile emerging markets
index .MSCIEF fell 3.1 percent.
The Dow Jones industrial average .DJI> closed down 66.58
points, or 0.63 percent, at 10,444.37. The Standard & Poor's
500 Index .SPX> ended 5.75 points, or 0.51 percent lower at
1,115.05. The Nasdaq Composite Index .IXIC> finished down 18.89
points, or 0.82 percent, at 2,298.37.
Not all was perceived as bad news on Wall Street.
The S&P 500 bounced off its 200-day moving average shortly
before noon, a key technical level it breached that should
provide support going forward.
Market talk on potential meetings or action by the European
Central Bank helped the euro to reverse course.
A European Central Bank spokesman, however, declined to
comment on market rumors of fresh central bank action.
"We've got this rally in the euro and I think it's the
market's understanding and fear that the G7 is concerned about
the speed of the euro's decline," said Dean Popplewell, chief
currency strategist, at OANDA in Toronto.
"The market is worried or is anticipating some sort of
verbal intervention or even a multilateral currency
intervention to boost the euro."
The dollar fell against a basket of major currencies, with
the U.S. Dollar Index .DXY> down 1.01 percent at 86.281.
Against the yen, the dollar JPY=> was down 0.65 percent at
91.52.
U.S. gold futures for June delivery GCM0> settled down
$21.50 at $1,193.10 an ounce.
U.S. crude oil futures for June delivery settled up 46
cents at $69.87 a barrel, and surged at the close to a session
high $71.22.
Crude oil futures further out fell.
U.S. Treasury debt prices fell on Wednesday, giving back
earlier gains after the major stock indexes rose from session
lows. ID:nN19240036
The benchmark 10-year U.S. Treasury note US10YT=RR fell
3/32 in price to yield 3.37 percent.
Treasury prices had risen earlier in the day after European
stocks hit their lowest closing level in nearly two weeks.
The MSCI index of Asia-Pacific shares outside of Japan
.MIAPJ0000PUS dropped 3.3 percent, while Japan's Nikkei average
.N225 closed down 0.5 percent, its weakest finish in 11 weeks.
(Reporting by Caroline Valetkevitch, Gertrude Chavez-Dreyfuss,
Emily Flitter in New York; Alex Lawler, Atul Prakash and Jan
Harvey in London; Writing by Herbert Lash; Editing by Andrew
Hay)
