No short rule to rescue?
Pressure on equity markets, particularly in the financial sector continued throughout Thursday but markets rebounded after the Financial Services Authority (FSA) of Great Britain announced that it would restrict short sales on financial companies as of Thursday evening.
Morgan Stanley dropped to $11.70 by noon Chicago time, it lowest level since October 1996 and Goldman Sachs dropped to $85.88, down nearly 45% from the close on Friday Sept. 12.
Below is a five-minute chart of Morgan Stanley.
Both investment banks as well as the broader market rebounded after the FSA announcement (see: http://www.fsa.gov.uk/Pages/About/Who/index.shtml).
Equity markets opened stronger on Thursday after overnight news that the Federal Reserve’s Federal Open Market Committee has authorized a $180 billion expansion of its temporary reciprocal currency arrangements (swap lines). The Fed announcement (see: http://www.federalreserve.gov/newsevents/press/monetary/20080918a.htm) boosted the market temporarily. The market, however, could not maintain those gains and dropped into negative territory by mid-morning until the FSA news gave it a boost.
