Markets extend gains as US begins trading

Shares have extended gains on increased confidence in the eurozone and a rise in US retail sales.

The gains - of up to 4% - come as Europe makes another attempt to restore market order by banning short-selling of some financial shares.

Overnight, four eurozone countries - France, Italy, Spain and Belgium - banned short-selling of some stocks in an attempt to stabilise markets.

The Dow Jones began the last session of a turbulent week up more than 1%.

After initial falls, London's FTSE 100, Paris's Cac and Frankfurt's Dax indexes closed up between 3 and 4%.

The gains meant the London benchmark index finished the week up 1.39%, though the Cac and Dax failed to make back all their losses earlier in the week.

Short-selling involves investors selling stocks they do not own in the expectation they will drop in price, before buying them back and pocketing the difference.

Steven Maijoor, the chairman of the European Union's financial regulator, the European Securities and Markets Authority (ESMA), said there were no current plans to expand a ban on short-selling financial stocks to other countries, but added such a move could not be ruled out.

He added that the current curbs would not be permanent.

The last time major Western countries made a similar move was in 2008 after the collapse of Lehman Brothers prompted the US and the UK to curb the practice.

Both countries' market authorities said they had no plans to introduce another ban.

Weak economies

Investors remain wary of investing while fears about eurozone and US debts remain.

Aside from the US retail sales figures - which showed sales up 0.5% in July, the biggest rise since March - Friday's economic news held little to reassure investors.

Greek economic growth suffered a 6.9% contraction in the second quarter compared with a year earlier, worse than the 5.5% fall seen in the first three months of the year, according to its national statistics agency.

French official figures showed no growth in the second quarter compared with 0.9% growth in the first. Analysts had been expecting a rise of 0.3%.

Experts were not convinced the new short selling ban would do much to restore market order and confidence.

"In the short-term it will help calm things down, but if you look at what happened at Lehman during the crisis, it didn't do much," said Ion-Marc Valahu at fund manager ClairInvest.

Earlier in the week, South Korean authorities also banned short-selling of shares to try and stem losses. The country's Kospi index has seen some of the biggest falls globally in the past week.

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Media captionJames Hughes from Alpari, explains what short-selling is

Calming attempts

The short-selling ban is the latest in a series of moves by policymakers in Europe and the US to allay fear in the markets.

  • On Sunday night, the European Central Bank said it would buy bonds from Italy and Spain after emergency talks on the debt crisis
  • On Wednesday, the US Federal Reserve said it would keep interest rates at current levels until at least 2013
  • Also on Wednesday, the French government held an emergency session to discuss the crisis amid rumours - denied on all sides - that it could lose its top-ranked credit rating
  • On Thursday, the French President Nicolas Sarkozy and German Chancellor Angela Merkel said they would meet to discuss eurozone financial governance
  • On Friday, Italian Prime Minister Silvio Berlusconi said the country would adopt emergency budget cuts worth 20bn euros ($29bn; £18bn) next year and 25bn the year after through a mixture of privatisation, cuts and tax changes.

Investors are also sceptical about the effectiveness of these steps, too.

"These are the people who got us into these situations and now we're realizing they don't know what they are doing. The market's finally catching up," Jim Rogers of Rogers Holdings told the BBC's Asia Business Report.

On Friday, Japan's main index closed down 0.2%, South Korea's lost 1.3% but Hong Kong was up 0.13% towards the end of its session.