Stocks Down

May 25, 2010 - Stocks continue their downward trend Tuesday as investors around the world nervously monitor the Greece economy as the latest reports expose how the governments in the euro zone breached their own fiscal rules since they joined the Euro.

Compounding market woes was the ban issued May 18, by Germany on naked short selling of the stocks of the country’s 10 most important financial institutions. The ban took effect Wednesday May 19 and will last until March 31, 2011.

In short selling, investors borrow stocks with the aim of selling them, then buying them back at a lower price for profit. In naked short selling, investors sell the stocks without borrowing them first.

Greg Gibbs of the Royal Bank of Scotland Plc in Sydney commented that the “German ban creates a view that the authorities sense bigger problems than what may appear on the surface, creating more nervousness and fear.”

It was reported that the ban was necessary because of the “exceptional volatility” of euro-based bonds.

The Dow Jones Industrial Average fell 22.82 points (0.23%) to drop to $10,043.75 points. Standard & Poor’s 500 Index gained 0.38 points (0.04%) to settle at 1,174.03 points. Nasdaq Composite Index dropped 2.60 (0.12%) points to finish at 2,210.95 points.

In Asia, Japan’s Nikkei 225 Stock Average dropped 3.059%. South Korea’s Kospi Index fell 2.748%. Australia’s S&P/ASX 200 Index declined 2.54%.

Thursday last week when uncertainties about the EU bailout package intensified, investors dumped stocks wholesale and put their money in gold, the traditional sanctuary for funds in times of economic difficulties. Investors are keenly watching developing scenarios and it is most likely that they will again flock in droves to gold to fuel another run.

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Joshua Harris

Senior Staff Writer - Gold-Eagle.org