Stock markets in Europe could fall further next week in the absence of a quick solution to US housing crisis, analysts said on Friday.
The FTSE 100 index of leading shares finished Friday at 6,038.30 points, a plunge of 186 points or 2.99 percent from a week earlier.
The Paris CAC 40 shed 2.67 percent over the week and Frankfurt's DAX 30 shed 1.24 percent.
"Markets are set to remain volatile and this will provide some interesting opportunities for the selective investor," said Tim Scholefield, head of equities at Baring Asset Management. "Volatility is set to remain high for the foreseeable future."
World stock markets dived for a second day running on Friday as traders dumped shares on fears of a widening economic crisis caused by a global credit crunch.
Economists said investors were alarmed by signs that losses in the US subprime mortgage market -- high-risk property loans to which many US banks and investment funds are exposed -- was spreading to other regions.
"Fears of a full-blown credit crunch continues to grip the financial markets as uncertainty over which financial institutions have been affected by the turmoil in credit markets reduces market participants' appetite to lend cash," said Derek Halpenny, a senior economist at the Bank of Tokyo-Mitsubishi in London.
Banks, in particular, have seen their share prices slump in recent days after BNP Paribas, France's biggest bank, said it had suspended three investment funds exposed to the US housing market because it was unable to value the assets.
"Nobody really knows just how much exposure UK and Eurozone banks have to the US subprime problem," Global Insight analyst Howard Archer said.