European shares sharply down

European stocks hit their lowest closing level in nearly two weeks on Wednesday, dragged down by banking shares, as investors became jittery following Germany's move to ban naked short sales of a range of financial assets. Appetite for risky assets fell, with the VDAX-NEW volatility index surging 21 percent. The higher the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the lower the market's desire to take risk.
The FTSEurofirst 300 index of top European shares ended 3 percent lower at 996.38 points. It fell below 1,000 for the first time since a 750 billion euro ($930 billion) package aimed at preventing the Greek debt crisis from spreading was unveiled earlier this month.
Financial stocks were among the top losers, with the STOXX Europe 600 banking index falling 3.5 percent. Barclays, Lloyds, Royal Bank of Scotland, BNP Paribas, Societe Generale, Credit Agricole and Natixis fell 3.2 percent to 5.5 percent. "The markets never like governments interfering in what they regard as the efficient running of markets. A ban on short selling tends to have the adverse effects of sending traders looking for other methods of shorting the market," said Bill McNamara, analyst at Charles Stanley in Sweden.
Southern European indexes fell, with Spain's IBEX down 2.6 percent and Italy's MIB down 3.5 percent. Commodities came under intense pressure, with oil falling to $68 a barrel on high US stockpiles and weakness in other markets. Key base metals fell 2 percent to 2.8 percent on worries about growth prospects of industrial metals in Europe.
Miner BHP Billiton, Anglo American, Antofagasta, Rio Tinto, Xstrata and ENRC fell 5.4 percent to 7.5 percent, while oil major BP, Royal Dutch Shell, BG Group, Tullow Oil and StatoilHydro shed 2 percent to 4.8 percent. Around Europe, the UK's FTSE 100 index was down 2.8 percent, Germany's DAX index fell 2.7 percent and France's CAC 40 slipped 2.9 percent. About 454 million shares changed hands on the FTSEurofirst 300, representing 160 percent of its 90-day daily average volume.
The average daily volume in 2009 was 253 million shares. So far this year, the FTSE 100 has lost 4.7 percent, the DAX is up 0.6 percent and the CAC is down 11 percent, while southern European indexes have been hammered - with Spain's IBEX down 21 percent, Italy's MIB down 16 percent, Portugal's PSI 20 down 18 percent and Greece's ATG down 25 percent.