Sun, Nov 11, 2007 - Page 10 News List

Subprime rumors trigger sharp drops in European stocks


European stocks fell sharply on Friday as markets reacted to rumors about where more subprime-related losses would be found.

The UK's FTSE 100 Index lost 1.2 percent to 6,304.90, while France's CAC-40 Index shed 1.9 percent to 5,524.18. Germany's DAX Index fell 0.1 percent to 7,812.40.

Shares of UK-based Barclays tumbled amid speculation it may be carrying up to US$10 billion worth of losses on its books.

The company insisted that there was no "substance" to the rumor.

Markets remain on edge as investors try to quantify the amount of damage done to the financial services sector from credit-related problems.

"We are struggling to get a grip on the numbers that the banks will show," said Stephen Pope, head of equity research at Cantor Fitzgerald in London.

"There's little light at the end of this tunnel at the moment," he said.

Barclays shares slumped 2.4 percent.

The bank denied rumors it would take a US$10 billion hit but declined to comment on whether it faced any significant writedown at all.

Sentiment was not helped by US-based Wachovia, which signaled increasing credit troubles ahead in its third-quarter results last month, saying it expected to take an additional US$1.1 billion pretax hit as conditions continue to deteriorate in the subprime-mortgage market.

"With year-end looming and banks still working furiously to draw a line in the sand on these issues, it is hard to see sentiment rebounding in the short term," said Roger Cursley, equity strategist at Investec Securities in London.

Barclays and Wachovia's woes spilled over to the broader European sector, with Fortis slumping 4.1 percent and France's Societe Generale dropping 3.8 percent. Credit Argicole shed 4 percent.

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