European stocks slip into red as credit concerns resurface

LONDON (AFP) - Europe's main stock markets fell on Tuesday, reversing opening gains as investors refocused on a potential credit crunch linked to the struggling US housing sector, dealers said.

The fresh European falls came despite gains in most Asian markets.
In late morning deals, London's FTSE 100 index of leading shares shed 0.25 percent to 6,063.80 points. Frankfurt's DAX 30 lost 0.56 percent to 7,365.84 points and in Paris the CAC 40 dropped 0.52 percent to 5,371.51.

The DJ Euro Stoxx 50 index of eurozone shares dropped 0.83 percent to 4,138.49 points.

European and Asian markets had finished higher on Monday as calm appeared to return to global equity markets following last week's rocky trade.

But Wall Street had closed mixed as investors mulled the US Federal Reserve's actions to keep credit flowing in the face of a deepening mortgage crisis in the United States.

On Tuesday, Tokyo and Hong Kong markets extended gains.

"I was quite surprised to see the (European) markets higher at the open," Mark Priest at TradIndex said on Tuesday.

"I guess it was strength in Asian markets that provided some reassurance early on, but continued volatility on Wall Street shows we're not out of the woods yet."

In Europe, financial companies turned lower amid lingering concerns over the credit crunch.

Investors fear a credit squeeze -- whereby banks suspend normal lending practices -- sparked by rising numbers of American households who fail to keep up with payments on home loans in the subprime or high-risk mortgage sector.

In Frankfurt trade, Deutsche Bank shares fell 1.52 percent to 92.05 euros after reports that Germany's largest bank had borrowed funds from the US Federal Reserve last week via its so-called discount window lending rate.

The US Federal Reserve on Friday cut its discount rate it charges commercial banks by a half-point to 5.75 percent, as the central bank sought to ease credit concerns in world financial markets.

In London on Tuesday, market rumours of unspecified problems at British Insurance.com spooked the insurance sector with Prudential 0.84 percent lower, Standard Life down 1.08 percent and Aviva losing 0.28.

British housebuilder Persimmon was 1.12 percent lower at 1,236 pence after admitting that inquiry levels and cancellation rates had faltered in recent weeks.

In France, shares in building material groups Saint-Gobain and Lafarge fell 1.47 percent and 1.18 percent respectively amid jitters about the health of the global economy and credit concerns.