(Bloomberg) – Stocks and commodities slid and Treasury 10-year note yields neared the lowest level of the year after Germany banned some bearish bets against government bonds and banks. The euro rose from a four-year low on speculation European leaders will take steps to support the currency.

The MSCI World Index slumped 1.5 percent at 1:05 p.m. in New York for a fifth-straight drop, the longest streak since January. The Standard & Poor’s 500 Index fell 0.6 percent and the S&P GSCI Index of 24 commodities tumbled 1.4 percent, with both near their lowest levels since February. The euro rallied 1.1 percent to $1.2339, helping to send gold down 2.8 percent. The 10-year Treasury yield lost one basis point to 3.33 percent.

Germany’s ban of naked short-sales spurred concern investors will lose options for hedging against losses on risky assets. U.S. equities also tumbled after the Mortgage Bankers Association said a record share of U.S. mortgages were in foreclosure and the Senate moved closer to voting on a bill to strengthen regulation of Wall Street.

“It’s like seeing a movie you’ve seen before and which doesn’t end that well,” said E. William Stone, who oversees $104 billion as chief investment strategist at PNC Wealth Management in Philadelphia. “There’s concern that the European situation may spread and we can see a repeat of the financial crisis of 2008. The German ban is the same kind of game plan and it didn’t necessarily work at that point either.”

200-Day Average

The S&P 500 pared a decline of as much as 1.8 percent after slipping below its average level over the past 200 days. All 10 industry groups in the benchmark gauge retreated, led by industrial companies and producers of raw materials and energy. Caterpillar Inc., Boeing Co. and DuPont Co. lost more than 2.2 percent to help lead the Dow Jones Industrial Average’s losses.

Germany will act alone if necessary in controlling “destructive” financial markets, Merkel said, a day after the BaFin regulator banned naked short sales –speculating against companies investors don’t own — for 10 banks and insurers, as well as naked credit-default swaps on euro-area government debt.

Germany has largely failed to persuade other nations to follow its prohibition on naked short-selling, limiting the effect of the rules. A Europe-wide ban on the practices is “doubtful,” Eddy Wymeersch, Europe’s top market regulator, said in a telephone interview today.

‘Waste of Time’

“Unless you have the U.K., United States and rest of Europe on board, then it’s a waste of time,” David Buik, a market analyst at inter-dealer broker BGC Partners in London, said in a telephone interview today. “You’re asking people to look for trouble. It’s so ham fisted it’s laughable.”

The euro’s gains today can be partly attributed to the Swiss National Bank’s sales of the franc, and they probably won’t last as European leaders struggle to come up with a common stance on the currency, BNP Paribas SA said. The euro rallied 1.6 percent against the franc.

“The Swiss National Bank has been effectively intervening and that caused a general advance of the euro, but if you ask if this is going to last, no,” Hans-Guenter Redeker, London-based head of currency strategy at BNP Paribas, said in an interview. “They’ll find it difficult to speak with one voice. If at all, the action will be short-lived and I don’t think the euro can stabilize at these levels.”

Europe Tumbles

The Stoxx Europe 600 Index tumbled 3 percent as all 19 industry groups fell at least 1.4 percent. Basic resources stocks led the declines, with BHP Billiton Ltd., the world’s biggest mining company, and Rio Tinto Group, the third largest, slumping at least 5.4 percent in London. Deutsche Bank AG lost 2.9 percent in Frankfurt while Banco Santander SA, Spain’s largest lender, retreated 2.6 percent in Madrid. ICAP Plc, the world’s biggest broker of transactions between banks, slipped 4.2 percent after saying profit declined.

Italy’s FTSE MIB Index slumped 3.5 percent and the Irish Overall Index slid 4.2 percent to lead declines among European equity markets. UniCredit SpA, Italy’s biggest lender, fell 6 percent. The Bank of Italy said in a statement late yesterday that the country’s banks are allowed to opt for new rules aimed at “neutralizing” the effect of capital losses and gains on regulatory capital from holding European government bonds.

Copper for delivery in three months fell 2.8 percent to $6,510 a metric ton on the London Metal Exchange. Nickel and zinc slumped 3.8 percent. Gold for immediate delivery declined 2.8 percent to $1,191.50 an ounce and palladium retreated 7.8 percent. Oil dropped to a seven-month low, losing 1.8 percent to $68.13 a barrel.

Emerging Markets

The benchmark MSCI Emerging Markets Index dropped 3.3 percent, its biggest plunge on a closing basis since August 17. Poland’s WIG20 Index slid 3.7 percent, Russia’s Micex lost 3 percent and Ukraine’s PFTS Index fell 5.3 percent.

The MSCI Asia Pacific Index lost 1.5 percent to its lowest level in more than three months. Nippon Sheet Glass Co., which gets 42 percent of its revenue from Europe, tumbled 3.2 percent in Tokyo.

Thailand’s SET Index rose 0.7 percent in a shortened trading session as security forces backed by armored vehicles cleared a protest camp in central Bangkok and forced its leaders to surrender.

The 10-year German bund yield declined seven basis points to 2.76 percent. Germany sold 4.57 billion euros of 10-year bunds, Europe’s benchmark debt security, at an average yield of 2.75 percent, the lowest since at least 1998, according to Federal Finance Agency data. Investors bid for 1.4 times the securities offered, the lowest bid-to-cover ratio this year.

Gilts, Libor

The yield on the 10-year U.K. gilt slid nine basis points to 3.66 percent. The rate banks say they pay for three-month loans in dollars rose to the highest since July 31, according to the British Bankers’ Association. The London interbank offered rate, or Libor, for such loans rose to 0.477 percent today from 0.465 percent yesterday, the BBA said.

The cost to protect against defaults on U.S. corporate bonds fell, trading in a benchmark credit derivatives index shows. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined 3.7 basis points to a mid-price of 116.95 basis, according to Markit Group Ltd. The gauge climbed 12.2 basis points yesterday, the biggest jump since May 6, Markit index data show.

To contact the reporters on this story: David Merritt in London on dmerritt1@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net.

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