LONDON, Sept 5: European stock markets sank sharply into the red on Wednesday as concerns returned about the global economic impact of the US home loan crisis, dealers said.

The London FTSE 100 index of leading shares lost 1.66 per cent at 6,270.70 points. In Frankfurt the DAX 30 fell 1.73 per cent to 7,588.03 and the Paris CAC 40 closed 2.14 per cent lower at 5,551.55 points.

The DJ Euro Stoxx 50 index fell 2.06 percent to 4,235.41.

Wall Street shares tumbled in volatile trade as lingering concerns about the availability of credit and more gloomy news on the housing market weighed on sentiment.

The Dow Jones Industrial Average was down 1.23 per cent at 13,284.09 in midday trade, while the tech-laden Nasdaq composite was 0.76 per cent lower at 2,610.22.The Standard & Poor’s 500 broad-market index slumped 1.20 per cent to 1,471.48.

Dealers said concerns about tightening credit appeared to be buffeting several London-based banks, and that US investors remained jittery about further potential portfolio losses in the banking and financial sector.

In London, banking and insurance sectors were the main drag on blue chips.

Northern Rock was the worst blue chip performer, falling more than 5.0 per cent to 693 pence after Lehman Brothers cut the bank’s rating to “underweight” from “equal weight” with a new target of 820 pence from 858.—AFP