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Spain, Italy Ban Short Selling of Stocks to Slow Market Turmoil
- (www.bloomberg.com) Spain and Italy reinstated
a short- sale ban on stocks as bank shares plunged to record lows, bond yields
rose and the euro traded below its lifetime average against the dollar on
concern the debt crisis is growing. Spain’s CNMV market regulator banned the
creation of negative bets on equities through shares, derivatives and over-
the-counter instruments for three months. Italy’s Consob prohibited the
practice on 29 banking and insurance stocks for one week, citing “grave
tensions” in financial markets. Today’s move echoes decisions in August last
year by the two nations plus France and Belgium after European banks hit their lowest levels
since the credit crisis of 2008 and 2009. Most bank stocks extended their
decline once the bans were lifted.
Italian provinces warn cuts may close schools - (www.reuters.com) Italian regional authorities
may not be able to open schools after the summer break if spending cuts planned
in the government's latest spending review are carried through, the head of the
Union of Italian Provinces (UPI) said on Monday. "With these cuts we won't
be able to guarantee the opening of the school year," UPI President
Giuseppe Castiglione told reporters in Rome. Piero Lacorazza, president of the
province of Potenza in southern Italy, said the comment was "not an
exaggeration", adding that "half of the provinces are in serious
financial difficulty".
Sicily’s Fiscal Problems Threaten to Swamp Italy - (www.nytimes.com) As Prime Minister Mario
Monti fights to protect Italy from
the contagion driving up its borrowing costs to perilous levels, one region in
particular has been in the spotlight: Sicily, which some fear has become “the Greece of
Italy” and is at risk of defaulting on its high public debts. Mr. Monti wrote
to Sicily’s regional president last week warning that he had
“serious concerns.” The day before, an official in the Sicily
branch of Italy’s leading industrialists association called for the island to
be put into receivership by the central government to clean up its finances. When
headlines about a potential Sicilian default ricocheted the globe, the
government quickly played down concerns and said it would send 400 million
euros, about $486 million, to ease Sicily’s liquidity crunch so it could
continue to pay salaries and pensions.
LCH Raises Extra Margin for Trading Italian, Spanish Bonds -
(www.bloomberg.com) LCH Clearnet Ltd., Europe’s
biggest clearing house, raised the extra deposit it demands from clients to
trade some Spanish and Italian government bonds, it said today in a statement on
its website. The margin for trading Spain’s
securities maturing in seven to 10 years will increase to 12.2 percent from
11.8 percent, according to the statement. For debt due in 10 to 15 years it
will climb to 16 percent from 14.7 percent, and for 15- to 30- year bonds, the
charge will be 20 percent, up from 17.9 percent. Spain’s government bonds
plunged today, pushing 10-year yields to a euro-era record of 7.57 percent,
amid concern the nation will need to offer financial support to its regions.
Rates on similar-maturity Italian debt jumped as much as 26 basis points, or
0.26 percentage point, to 6.43 percent, the highest since January.
Slovenia’s Fate Rests With Spain as Bonds Punished - (www.bloomberg.com) Spain may
hold the key to Slovenia needing a bailout for its banks, as contagion from the
region’s fourth-largest economy threatens to engulf one of its smallest. Yields
on Slovenia’s nine-year bonds are rising and falling almost in parallel with
Spain’s, and topped 7 percent last week as investors added to bets that Europe’s
debt turmoil may lock both nations out of the market. While borrowing costs in Belgium,
Austria and France have dropped to records, Slovenia’s have surged on concern
that it will have to channel funds to its banks as bad loans climb. “Whether Slovenia has to take a bailout or not
is really out of their control,” said William
Jackson, an economist at Capital Economics in London.
“Slovenia is a small economy and it
is very susceptible to risk aversion.” Yields on Slovenia’s 4.375 percent bond,
maturing in January 2021 surpassed 6 percent every day in the past month and
closed above 7 percent on seven trading days, approaching levels that prompted
bailouts for Greece, Ireland and Portugal.
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