* Germany stamps on speculative trading, unsettles markets
* Euro hits fresh four-year low, then recovers
* Asian shares rattled; MSCI ex-Japan, Nikkei tumble
* European shares seen falling at open
* Money shifts to safe havens, Treasuries
(Repeats to more subscribers)
By Raju Gopalakrishnan
SINGAPORE, May 19 (Reuters) - The euro <EUR=> fell to a
fresh four-year low on Wednesday after a German move to sharpen
financial regulation raised doubts about the prospect for
global recovery, pulling down Asian stocks, metals and crude
oil.
The U.S. dollar index rose to a 14-month high as investors
sought safer havens for their cash, including in the yen and
U.S. Treasuries.
European stock markets were seen falling sharply at the
open. They had closed on Tuesday before Germany announced its
unilateral ban on speculative selling of some securities.
The move, coupled with strengthening financial regulation
in the United States, roiled financial markets as investors
stampeded out of riskier assets and worries spread that the
global economic recovery could be derailed.
Britain's FTSE 100 <> was expected to open as much as
1.6 percent lower, financial bookmakers said.By 0601 GMT, stock
futures for the STOXX Europe 50 <STXEc1>, Germany's DAX <FDXc1>
and France's CAC-40 <FCEc1> had dropped 1.1 to 2.2 percent.
"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.
Germany said it was banning naked short sales of
euro-denominated government bonds, credit default swaps based
on those bonds, and shares in Germany's 10 leading financial
institutions.
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's lack of coordination with any other countries,
including euro zone members, underscored how the measures may
backfire and so unsettle, rather than calm, markets already
nervous about the debt crisis, analysts said.
"Germany just switched off the financial lights in Europe,"
said a senior forex trader at a European bank in Singapore.
The euro fell 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 $1.2208, 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.
DOLLAR, YEN BENEFIT
The MSCI index of Asia-Pacific shares outside of Japan
<.MIAPJ0000PUS> dropped over 2 percent to a three-month low. It
has fallen about 4.3 percent since the start of the week.
Japan's Nikkei average <> fell as much as 1.8 percent,
also to a three-month low, on the regulation worries and as the
weak euro dragged on exporters. It later recovered but still
closed down on the day by 0.5 percent for its weakest finish in
11 weeks.
High-yielding currencies like the Australian and New
Zealand dollars <AUD=> <NAD=> also fell as investors reduced
their exposure to riskier investments.
"Under other circumstances, the naked short selling ban is
actually a move that might be taken positively by markets,"
said Hideyuki Ishiguro, a strategist at Okasan Securities.
"What markets really wanted to hear from authorities,
especially in Europe, was some sort of statement strongly in
support of the euro framework. Instead, there was this -- and
the disappointment set off selling."
The Australian dollar <AUD=D4> fell to an eight-month low
of $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 fears of tighter regulations
threw doubts on hopes for a global economic recovery.
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 assets perceived as safer bets in time of
uncertainty boosted the dollar and the yen.
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.
Treasuries also rose during Asia time. 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 $1209.20 by 0524
GMT, down $10.50 from New York's notional close on Tuesday.
It 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)
