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Banks Beat Another Hasty Retreat

FRANKFURT -- The mood was bleak and stocks were lower in Europe after Wall Street's whimpering close Wednesday.

Russia's woes returned full-force to spook markets. The ruble plunged and assets at six Russian banks were frozen. There was also a report that

Dresdner Bank

had unsecured credits of a billion marks, one-third more than previously thought.

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Indices at midday were off session lows in light trading. Wall Street is still boss here, and lower

S&P 500

futures were making investors queasy as New York's opening bell approaches. S&P futures were last down 10.10 points at 980.70.

In Frankfurt, the

Xetra Dax

was down 106 points, or 2.2%, at 4842, while in London the

FTSE

was down 68, or 1.3%, at 5166 and in Paris the

CAC

was down 70, or 1.9%, at 3659.

An additional weight around the neck of stock markets was another steep drop in the dollar against the mark, which will cut a huge chunk of profits from the bottom lines of European exporters. The dollar was bid at 1.7248. The dollar also fell sharply against the yen to 135.33.

In Frankfurt, Dresdner Bank was down 2.6%, and other banks across Europe were whacked.

Deutsche Bank

was down 3.3%,

Credito Italiano

down 4.3%,

Banque Nationale de Paris

down 3%, and

Paribas

down 2.9%.

Nearly all sectors in Europe were suffering losses today, but oils displayed some scattered strength.

Shell

(

(SC) - Get Report

SC ADR) was up 1.5%,

Total

(

(tot) - Get Report

TOT ADR) was up 1.1% and

Elf Aquitaine

(

(elf) - Get Report

ELF ADR) was up 0.7%.

The list of global worries appears to be growing, causing investor confidence to deteriorate futher. Latin America's woes and the possible negative effect on the economic Supertanker USA weighed on sentiment here, especially after Colombia's devaluation of the peso. Asia warning lights and bells also were flashing brightly and clanging loudly as political and monetary turmoil in Malaysia grows and, possibly, spreads throughout the region.

These jitters have made cash and single digit-returns look extremely attractive to European investors. The rallying cry "cash is trash," often heard as bourses soared to record highs, is not being uttered anymore. A glance this morning at U.S. long bonds shows investor distaste for stocks. As stock indices dropped the long bond was up, despite a weak dollar, bringing the yield down to 5.31%.

Plum Shipton, European equities strategist at

Merrill Lynch

in London, advises against buying dips, saying she thinks a retest of recent lows is almost a certainty.

While some investors--pockets bulging with cool cash--are eagerly awaiting a final, agonizing blow-off to stake fresh long positions, she is not so sure the current downtrend will end so quickly, so mercifully: "I think this will be a steady, downward deterioration."