European Markets Rise After Short-Selling Ban

France, Italy, Spain and Belgium banned investors from profiting on declining stocks

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Four European countries have banned the practice of short-selling financial stocks overnight, spurring what Reuters calls a "tentative recovery" of the embattled European markets. France, Italy, Spain and Belgium now say investors may not make the complicated investments that glean profit from stocks that decline in value. The practice, in which investors borrow stock and sell it, buying it back at a lower price and keeping the difference, contributed to the U.S. market crash in late 2008. At that time, the Securities and Exchange Commission imposed a similar ban on short-selling financial stocks. In Europe, the ban seems to be working, at least for now, Reuters reports.

Traders said the measure would provide temporary relief to jittery investors, but concerns about euro zone debt problems and a deteriorating outlook for the global economy were set to keep trading erratic.

"Something needed to be done, the rumors were silly and the market was full of emotion and fear. So this provides a break in that, so not bad," a London-based fund manager said.

"I don't think it works long term but should buy some time."

Bank shares have risen since the ban, and European markets are up overall on Friday, but they were still expected to close 2 percent lower for the week, Reuters reported.

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