LONDON, Sept 15 – Europe\’s main stock markets dropped on Wednesday in contrast to sharp gains in Tokyo after the Japanese government intervened to weaken the yen, aiding the country\’s exporters.
Markets also mulled an announcement by the European Union that it had taken steps to regulate high-risk trading instruments with new rules governing practices blamed for the global financial crisis.
London\’s FTSE 100 index of top shares fell 0.26 percent to 5,552.80 points in midday trade.
Frankfurt\’s DAX 30 slid 0.36 percent to 6,253.70 points and in Paris the CAC 40 index was down 0.48 percent to 3,756.37 points near the half-way mark.
The Stoxx 50 index of leading eurozone companies declined 0.49 percent to 2,792.87 points.
The European Commission proposed new rules aimed at bringing more transparency to over-the-counter (OTC) derivatives and the practice of "short-selling" securities in an effort to tame financial markets.
"No financial market can afford to remain a Wild West territory," said EU financial services commissioner Michel Barnier, warning that OTC derivatives have a "big impact" on the prices of products ranging from mortgages to food.
"The absence of any regulatory framework for OTC derivatives contributed to the financial crisis and the tremendous consequences we are all suffering from," he said.
The aim is to prevent one failure in a market from reverberating across the financial system, two years after the collapse of Wall Street giant Lehman Brothers, Barnier said.
The new rules would require investors to report trade in derivatives in the 27-nation EU to central data centres. Such reporting is not required at the moment.
The EU\’s executive arm also wants to set up a tracking system for "short-selling," the sale of a security not owned by the seller in the hope of turning a profit by buying it back later at a lower price.
Before the EU announcement, Tokyo\’s Nikkei index closed up 2.34 percent as Japan\’s government intervened in foreign exchange markets to bring the Japanese currency down from a 15-year high of 82.86 yen to the dollar.
Finance Minister Yoshihiko Noda confirmed the intervention — the first such action by Japan since March 2004. The yen later traded at 85.13 to the dollar.
A higher yen hurts Japanese exporters by making their products more expensive overseas and shrinks foreign earnings of local firms.
Wall Street closed mixed on Tuesday as traders weighed fragile US retail sales figures.