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UK shares enjoy strong increases UK shares enjoy strong increases
(21 minutes later)
Leading UK shares rose in early Friday trading as investors appeared to welcome the City regulator's ban on short-selling in financial stocks.Leading UK shares rose in early Friday trading as investors appeared to welcome the City regulator's ban on short-selling in financial stocks.
Shares were also lifted by US plans to rid American banks of their bad debt.Shares were also lifted by US plans to rid American banks of their bad debt.
The FTSE 100 index was up as much as 338 points or 7% to 5,218 in early exchanges, with banking stocks among the biggest risers. RBS was up 42%.The FTSE 100 index was up as much as 338 points or 7% to 5,218 in early exchanges, with banking stocks among the biggest risers. RBS was up 42%.
The gains come after the Financial Services Authority (FSA) announced its temporary move on Thursday night.The gains come after the Financial Services Authority (FSA) announced its temporary move on Thursday night.
Other banking stocks that were up sharply included HBOS, up 36%, Lloyds TSB, up 33%, and Barclays, up 27%.Other banking stocks that were up sharply included HBOS, up 36%, Lloyds TSB, up 33%, and Barclays, up 27%.
'Disorderly markets''Disorderly markets'
Short-selling involves traders profiting from falling share prices.Short-selling involves traders profiting from falling share prices.
The breathtaking rises in the price of bank shares this morning are symptomatic of a stock market that is bereft of reason and is being driven almost purely by fear and momentum. BBC Business Editor Robert Peston Read Robert Peston's latest blogWhat is short-selling?The breathtaking rises in the price of bank shares this morning are symptomatic of a stock market that is bereft of reason and is being driven almost purely by fear and momentum. BBC Business Editor Robert Peston Read Robert Peston's latest blogWhat is short-selling?
The technique works when investors borrow shares from another investor, and then sell them hoping the price will fall.The technique works when investors borrow shares from another investor, and then sell them hoping the price will fall.
The aim is then to buy back the asset at a lower price and return it to its owner, pocketing the difference.The aim is then to buy back the asset at a lower price and return it to its owner, pocketing the difference.
Previously anyone could short a position in a company's shares, but typically hedge funds were the main players.Previously anyone could short a position in a company's shares, but typically hedge funds were the main players.
The temporary ban on short-selling applies to 29 financial stocks.The temporary ban on short-selling applies to 29 financial stocks.
It was introduced by the FSA due to concerns that short-selling had been a contributory factor in the sharp falls in HBOS shares before it was rescued by Lloyds TSB.It was introduced by the FSA due to concerns that short-selling had been a contributory factor in the sharp falls in HBOS shares before it was rescued by Lloyds TSB.
The ban, which came into force at midnight on Thursday, will last until 16 January but the FSA will review its operation in 30 days.The ban, which came into force at midnight on Thursday, will last until 16 January but the FSA will review its operation in 30 days.
"While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets," said FSA chief executive Hector Sants."While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets," said FSA chief executive Hector Sants.
'Heart of problem''Heart of problem'
European stocks were also up strongly on Friday following the announcement overnight that US officials are working on a plan to help rid US banks of their bad debts.European stocks were also up strongly on Friday following the announcement overnight that US officials are working on a plan to help rid US banks of their bad debts.
US Treasury Secretary Henry Paulson said he wanted a solution that "aimed right at the heart of this problem".US Treasury Secretary Henry Paulson said he wanted a solution that "aimed right at the heart of this problem".
France's Cac 40 index was up 6%, while Germany's Dax had advanced 3.8%.France's Cac 40 index was up 6%, while Germany's Dax had advanced 3.8%.
Wall Street's Dow Jones finished Thursday up 3.9%.Wall Street's Dow Jones finished Thursday up 3.9%.
The UK short-selling ban applies to shares in the following companies - Admiral, Alliance & Leicester, Alliance Trust, Arbuthnot, Aviva, Barclays, Bradford & Bingley, Brit Insurance, Chesnara, European Islamic Investment Bank, Friends Provident, HBOS, Highway Insurance, HSBC, Islamic Bank of Britain, Just Retirement Holdings, Legal & General, Lloyds TSB, London Scottish, Novae, Old Mutual, Prudential, Resolution, Royal Bank of Scotland Group, RSA Insurance, St James's Place, Standard Chartered, Standard Life, and Tawa.The UK short-selling ban applies to shares in the following companies - Admiral, Alliance & Leicester, Alliance Trust, Arbuthnot, Aviva, Barclays, Bradford & Bingley, Brit Insurance, Chesnara, European Islamic Investment Bank, Friends Provident, HBOS, Highway Insurance, HSBC, Islamic Bank of Britain, Just Retirement Holdings, Legal & General, Lloyds TSB, London Scottish, Novae, Old Mutual, Prudential, Resolution, Royal Bank of Scotland Group, RSA Insurance, St James's Place, Standard Chartered, Standard Life, and Tawa.
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