Short-selling ban in four nations sends stocks up

The Spanish stock market rallied for a second consecutive day on Friday after a ban was imposed on the short-selling of stocks in four European countries, including Spain.

The country's blue chip Ibex 35 was up 397.90 points, or 4.82 percent, closing at 8,647.30 points ? its second-biggest gain this year.

Spain's risk premium also dropped from Thursday, closing at 265 basis points over the benchmark German bund.

Markets rose across Europe after Spain, France, Italy and Belgium banned short-selling ? borrowing shares and selling them with the expectation that the price will fall ? among a group of banks and financial institutions to prevent the turbulence that has battered bourses across the globe. A string of rumors, including speculation that France was poised to lose its AAA rating, helped knock a third of the value off European bank shares this month.

All of the Ibex's big performers closed with gains: Banco Santander was up 6.56 percent; BBVA, 6.23 percent; Repsol, 5.99 percent; Iberdrola, 4.47 percent and Telefónica, 4.29 percent.

The European Commission said Friday that it wants to study whether or not to make the ban permanent among its member nations as it readies itself to debate a new set of financial regulations next month.

? one of the world's biggest financial centers ? is opposed to the ban.

"We regret these actions," Andrew Baker, chief executive officer of the London-based Alternative Investment Management Association, said in an emailed statement on Friday, which was quoted by Bloomberg. "Short-selling is a legitimate market practice that helps capital markets function effectively."

But the German Finance Ministry said it "supports the measures" announced by Spain and the other countries.

"Only through this can destructive speculation be countered in a convincing way," the ministry in Berlin said in a statement.

In May 2010, Germany prohibited some short-selling transactions, including naked short selling of stocks and naked credit-default swaps (CDS) of euro-area government bonds in an effort to curb the volatility of the debt markets.

Prime Minister José Luis Rodríguez Zapatero remains in contact with his economic team as it prepares its own series of fiscal measures, which will be announced next Friday. The government hopes to rake in an additional 5 billion euros this year with hikes in the corporate tax rate for the last quarter and through other measures aimed at the pharmaceutical industry, Moncloa sources said. The government said it intends to save about 2.5 billion euros on the cost of paying for medicines.

Another measure the Cabinet is considering, according to sources, is whether to extend by an additional six months the 400-euro monthly emergency payment given to those whose unemployment benefits have run out.

The prime minister, who has resumed his family vacation in Doñana, will fly back to Madrid on Thursday and attend a reception for Pope Benedict XVI, before later holding a meeting with him.