[R]12:00PM New York, 5:00PM London - European stocks finished lower tracking other shares in Asia and US. Confidence crisis in financial stocks persisted in UK and European trading.[/R]

European stocks dragged marginally lower on the declines on Wall Street and in Asia, as investors’ worldwide hedge against spreading U.S. mortgage markets risk. Financial stocks took a battering but regional indexes recovered from sharp losses earlier on. Paris led the decliners with a loss of 0.7% followed by 0.56% loss in London. Germany rose 0.28%.

In London trading FTSE 100 lost 0.56% to 6,109.30 dragged by bank stocks. Investors fears over the U.S. credit crunch dragged financials and brokerages. The pound fell to 1.99 per dollar and 67.65 pence against euro after the Bank of England minutes of meeting showed unanimous vote to maintain the key bank rate at 5.75% for this month. The members of the committee remain focused on controlling inflation and few expressed concerns about the level of capacity utilization and output prices. The bank also said that it is too early to judge the impact of the past rate increases on the consumer spending.

Banks shares skid sharply on lower earnings forecast. Of the 102 stocks in the FTSE 100 index, 68 declined, 29 increased, and 5 were unchanged. Northern Rock led the index stocks with loss of 5.3% on weaker earnings expectations, followed by losses in Experian group of 3.93%, and 3.8% in Schroders plc. Royal Bank of Scotland and Standard Chartered fell by more than 2%. Mining stocks Anglo America and BHP Billiton fell over 1%. Persimmon led the index stocks with a gain of 3.72% while Barrat DEV and Scottish Newca firmed 2.77% and 2.24% respectively. Hammerson jumped 2.2% followed by increases in ITV of 2%, 1.8% in Unilever, 1.5% in Rexam and Reuters Group.

Lower earnings predictions have hit hard on Northern Rock. The bank has lost 9.4% in value since January anchoring UK’s bank stocks year-to-date growth index. In the first interim net income at 188.2 million pounds was up 0.2% Analysts expect full-year earnings at 213 million pounds.

In Frankfurt trading DAX 20 rose 0.28%, the only notable mover across the region spurred by news Germany was free of US mortgage market concerns. Finance Minister Peer Steinbrueck indicated Germany would not feel the effects the US credit market crisis. The German economy is expected to grow by 0.4% in Q3, up from 0.3 in Q2. Industrial shares rallied with Bayer AG up 5.37%. Deutsche Luft RG added 1.56 percent while Volkswagen gained 1.30%. Deutsche Bank was not sparred from the regional bank stocks’ free-fall losing 2.51%. Deutsche Boerse lost 2.67% with Hypo Real Estate shedding 2.48%

In Paris trading CAC 40 fell 0.66% pulled down by bank shares. Confidence in financials shares remained weak amid weaker earnings forecasts caused by the US credit market problems. Societe Generale crashed 2.3% while BNP dragged 1.5% Arcelor Mittal lost 61 cents, or 1.4%. AXA SA (CS FP) eased 1.2%. Uniliver Ny rose 1.79%, France Telecom added 1.51%. Kon Kpn Nv was up 1.06%.


Nestle SA reported net income in the half year to June was up 18% to 4.92 billion francs. EPS rose similarly to 12.6 francs. Sales were jumped 8.4% to 51.1 billion. The company plans a share repurchase worth $21 billion. Nestle stocks lifted 9.5% in Zurich.


[R]11:30AM Market averages gained some ground on more cash support from the Fed.[/R]

U.S. stocks gained some ground in late morning trading on the back of a Fed Reserve's announcement related to the injection of more cash into the banking system. There were conflicting announcements concerning plans of repurchase agreement in which the Fed buys securities from dealers, who then deposit the money into commercial banks. Eventually, the Fed said it would buy $7 billion.

KKR Financial Holdings (KFN: chart) said it was selling $5.1 billion of residential mortgage loans, adding it will no longer invest in such assets. Company's shares plunged nearly 20% as it also got a downgrade from Lehman to equal-weight.

Countrywide Financial Corp. (CFC: chart), the biggest U.S. mortgage lender, fell 5.4% after Merrill Lynch downgraded the stock, with the warning that the company may have to file for bankruptcy. Again in the sector, Arbor Realty Trust (ABR: chart) slipped 3% after it was downgraded by Lehman Brothers due to its broad exposure to mortgage backed securities.

Among other stocks driven by analyst comments, Fossil (FOSL: chart) jumped 6.8% after the fashion accessory retailer was upgraded by Piper Jaffray from market perform to out perform on higher sales of its watches.

In late morning trading, the Dow Jones was up 15.61, or 0.12%, at 13,044.53, after briefly trading below 13,000 for the first time since April 25. The S&P's 500 index was up 5.10, or 0.36%, at 1,431.64, and the Nasdaq was up 6.77, or 0.27 %, at 2,505.89. Bonds were little changed, with the yield on the benchmark 10-year Treasury note at 4.73%, the same as late Tuesday.


[R]Consumer price index gained 0.1% in July.[/R]

Consumer prices saw modest growth in the month of July, according to a report released by the Department of Labor on Wednesday, with the small increase in prices coming in line with economist estimates. The Labor Department said its consumer price index edged up 0.1 percent in July following a 0.2 percent increase in June. The modest increase came in line with economist estimates of an increase of about 0.1 percent.

With the modest increase, the annual rate of consumer price growth slowed to 2.4 percent from 2.7 percent in the previous month. A notable decrease in energy prices helped to limit the upside for prices, with energy prices falling 1.0 percent in July after falling 0.5 percent in June. The decrease marked the biggest drop in energy prices since a 1.5 percent drop in January. The drop in energy prices helped to offset notable increases in apparel and medical care prices, which rose 0.4 percent and 0.6 percent, respectively.