* Germany stamps on speculative trading, unsettles markets
* Euro hits fresh four-year low, then recovers
* Shares rattled; MSCI ex-Japan, Nikkei tumble
* High-yield currencies, metals, oil fall
* Money shifts to safe havens, Treasuries and gold gain
(Repeats to more subscribers)
By Raju Gopalakrishnan
SINGAPORE, May 19 (Reuters) - The euro <EUR=> fell to a
fresh four-year low on Wednesday after Germany moved to sharpen
financial regulation, taking down commodities and Asian stock
markets in its wake as investors stampeded out of riskier
assets.
Asian stocks fell sharply, as did industrial metals, on
worries that the German ban on naked short-selling of some
securities, coupled with strengthening financial regulation in
the United States, would derail the global economic recovery.
Analysts said although it was still a unilateral move by
Berlin, European markets were likely to take a hit later in the
day.
"If you combine this new regulation in Germany with all the
other negative headlines we've been having in the past few
days, most probably European markets will react negatively,"
said Pierre Faddoul, a credit analyst at Aberdeen Asset
Management in Singapore.
The ban on naked short sales of euro-denominated government
bonds, credit default swaps based on those bonds, and shares in
Germany's 10 leading financial institutions was announced after
European markets closed on Tuesday.
In naked short selling, a trader sells a financial
instrument short, betting that its price will fall, without
first borrowing the instrument or ensuring that it can be
borrowed, as would be done in a conventional short sale.
[]
"Germany just switched off the financial lights in
Europe," said a senior forex trader at a European bank in
Singapore.
The euro slipped as low as $1.2143 on trading platform
EBS,
its weakest level since April 2006 and taking it losses so far
in 2010 to more than 15 percent. It later recovered to around
$1.2215, but the bounce could be short-lived.
"Stocks and CDS trading are now regulated. The government
bond market is supported by the European Central Bank's buying.
So investors have no place but the currency market to express
their views on Europe," said Masafumi Yamamoto, chief FX
strategist Japan at Barclays Capital.
High-yielding currencies like the Australian and New
Zealand dollars also fell on the move.
Meanwhile, the dollar and the yen benefitted as players
sought the safety of the dollar and the low-yielding Japanese
currency.
The dollar index, which tracks the U.S. unit's performance
against a basket of major currencies, rose to a 14-month high
of 87.458 <.DXY> before slipping back to 87.135.
The MSCI index of Asia-Pacific shares outside of Japan
<.MIAPJ0000PUS> was down over 2 percent at a four-month low at
381.38 points. It has fallen about 4.7 percent since the start
of the week.
Japan's Nikkei average <> fell as much as 1.8 percent
to a three-month low on the regulation worries and as the weak
euro dragged on exporters.
"Germany's move to regulate naked short selling has
heightened uncertainty about the trading environment of
financial markets, leading investors to avoid risks," said Yumi
Nishimura, deputy general manager at Daiwa Securities Capital
Markets.
The Australian dollar <AUD=D4> fell to an eight-month low
at $0.854, with charts suggesting more losses as investors
dumped high-yielding currencies. The kiwi <NZD=D4> was down 0.6
percent at $0.6854
Australian shares <> also hit an eight-month low.
Industrial metals fell as the global economic recovery was
thrown into doubt.
London three-month copper <CMCU3> dropped $135 to $6,565 a
tonne, or over 2 percent. Zinc prices in Shanghai <SZNc3> fell
more than 5 percent, while London nickel <CMNI3> dropped 4.7
percent on the fall in the euro.
Crude oil futures slid to a seven-month low <CLM0>,
reflecting falls in other markets.
The flight to safety benefited U.S. Treasuries. The yield
on the benchmark 10-year note <US10YT=RR> eased to 3.33 percent
from 3.49 percent late on Monday.
Gold initially gained on a safe-haven bid, but then fell
back on fears of a correction. Spot gold <XAU=> hit an intraday
high of $1,227.10 an ounce before falling to $1,213.70 by 0250
GMT, down $6 from New York's notional close on Tuesday.
Gold struck a record of $1,248.95 an ounce on Friday on
fears that euro zone austerity measures could impede, rather
than aid, a recovery, but analysts say the market may be
techNically overbought.
(Editing by Neil Fullick)
