August 29

BBC - Traders have been worried about the state of the big banks European stocks have fallen sharply in early Wednesday trading after more declines in the US as housing market and credit fears persist.

London's FTSE 100 index was down 43 points to 6,059 in initial exchanges, while Frankfurt's Dax index had lost 57 points to 7,373.

The latest share falls were caused by Merrill Lynch brokers warning that the credit squeeze will hurt bank profits.

Investor confidence was also hit by weak US consumer sentiment figures.

The Dax was also hit by a fall in German consumer confidence in July, blamed on the turmoil in the markets.

Europe's early falls were mirrored in the Far East, where Japan's main Nikkei index closed down 275 points, or 1.7%, to 16,013.

Wall Street's Dow Jones closed down 280 points, or 2.1%, to 13,042 on Tuesday.

Stock downgrades

The latest warning about the impact of the problems in the credit market - centred on the crisis in the US sub-prime mortgage sector - was given by brokers at investment bank Merrill Lynch.

They downgraded their opinion of stocks in three firms exposed to the sub-prime sector - Bear Stearns, Lehman Brothers and Citigroup.

The mood of global investors has been further hit by released minutes of the most recent meeting of the Federal Reserve, which suggested a US interest rate cut might not be imminent.

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