(Adds details, background)
MADRID Jan 31 Spain's market regulator lifted its ban on short-selling stocks and bonds on Thursday in a sign of returning calm to markets targeted by speculators during last year's euro zone debt crisis turmoil.
The regulator imposed the ban in July during a massive sell-off in Spanish sovereign debt and shares. Stocks and bonds have rallied since the European Central Bank said it would act as a backstop to bets against peripheral euro zone countries.
Spain's borrowing costs have greatly eased since the height of the crisis during the summer, and funding is easier for the country's banks and corporations.
Some stocks seen as vulnerable to short selling, such as Abengoa, Acciona, ACS and Indra , were sold off in anticipation of the lifting of the ban.
Short-sellers borrow shares in anticipation the price will fall, booking a profit when they buy them back at a lower price. (Reporting By Sonya Dowsett; Editing by Fiona Ortiz and Helen Massy-Beresford)