FRANKFURT -- Stocks took another hit as market turmoil spread in Russia, sparked by the imposition of foreign-exchange controls and leading to renewed Asian currency weakness and a steep drop in Hong Kong stocks.

European markets also had to digest another major earnings disappointment, this time from

Veba

(

(VEB)

VEB ADR), Germany's largest utility. Veba blamed lower sales of electronic components in Asia for a drop in first-half earnings. Veba shares were down 6%.

Most markets were off session lows after rumors late this morning that the

Bank of Japan

was checking dollar/yen rates lifted the yen. The yen was at 145.70 to the dollar after earlier hitting 147.15.

European markets recovered from early lows as sentiment grows that the worst might be over after recent losses. Nonetheless, investors remained jittery and a glance at the major indices indicates that a lot of potential bargain hunters are not yet willing to place big bets that bourses have hit bottom.

In Frankfurt, Germany's

Xetra Dax

was down 108 points, or 2%, at 5278, while in London the

FTSE

was down 88, or 1.6%, at 5374 and in Paris the

CAC

was down 52, or 1.3%, at 3893.

S&P 500

futures were down 7.80 at 1082.70, off the overnight low of 1079.60.

The news that Russia had imposed foreign exchange controls on trading the

ruble -- often considered to be a prelude to a devaluation -- helped wreck Russian markets. The RTS stock index fell 11%, with trading at one point suspended for 35 minutes. Russian yields soared.

The seriousness of the situation was underscored by a letter by

George Soros

in the

Financial Times

. He warned that Russia's financial turmoil had reached a "terminal phase," urged a 15%-25% devaluation of the ruble and recommended that the currency then be pegged to the dollar or the euro.

In the fallout, Hong Kong's

Hang Seng

index slid 2.9%, Malaysia's main index fell 4.5% and Singapore's dropped 3%. Tokyo's

Nikkei

ended up just 3 points at 15,383.

Banks across Europe suffered steep losses, especially German banks, which are particularly exposed to problems in Russia.

Deutsche Bank

was down 3.5% and

Dresdner Bank

fell 4.6%.

And those with Asian exposure also were hit.

HSBC

was down 3.4% and

Standard Chartered

was off 4.5%.

Richard Vennekold, head of German equities at

Bayerische Vereinsbank

in Munich and a bear during recent weeks, said he now has become a cautious buyer. "We have so much bad Asia news already factored into this market, and today more with Russia. What can happen next to knock us lower? I don't think anything." He sees the downside risk for European markets at 2%, but upside potential at 10%.

Toby Denne, head European equities trader at

Credit Lyonnais Securities

in London, said he saw today's losses as a buying opportunity. "I think there is now a lot of value out there. The past two weeks we have seen a heck of a lot of indiscriminate selling. There are a lot of deeply oversold stocks."

He recommends autos, oils and media firms, but says it might be a bit too soon to buy banks.

Denne thinks downside potential in the near term -- barring a huge, unforseen worsening of the Asian crisis -- is limited. He reasons that there are too many investors on the sidelines -- double-barrel shotguns loaded with cool cash -- just waiting for just the right moment too pull both triggers.

But Denne quipped: "Never put too much faith in a trader who still has to work for a living. Only believe the ones who have become rich enough to call you from their yacht in the Caribbean."