Mortgage Fears Weigh on Markets

European stock markets fell on Tuesday despite gains in Asia and the US, and attempts by the Federal Reserve to ease concerns about a US mortgage crisis. Investors said that they were still concerned about how many companies were caught up in the US problems.

London’s main FTSE 100 stock index lost 0.5%, with France’s Cac 40 sliding 0.7 and Germany’s Dax shedding 0.6%.

Shares have tumbled in recent weeks as US mortgage market problems spread, and stocks were sold for safer investments

‘Volatile days’

The trigger for the recent stock rout has been fallout from the US sub-prime mortgage market, which has seen a number of US mortgage lenders hit amid fears that a rise in bad debt could cause a wider financial crisis.

“We are still in a situation where we can expect some volatile days,” said Richard Hunter, head of UK equities at Hargreaves Lansdown.

“On the one hand confidence is going to take a little while to return and on the other hand before such time as the extent of the credit problems are known it’s going to be very difficult to move on in any meaningful way.”

Investors are selling equities and other riskier forms of investment, and investing in various government bonds around the world.

That has seen bond prices rise and their yields fall.

On Monday, three-month US Treasury Bills suffered their biggest one-day drop since the October 1987 stock market crash.

And on Tuesday, Eurozone government bond yields dropped, extending the previous session’s falls, as continuing investor anxiety about a global credit squeeze supported demand