LONDON, Oct 8: Europe stock markets sagged on Monday as investors responded nervously to the US-led military onslaught on the Taliban in Afghanistan — and wondered what the backlash might be.

Bond prices and gold rose as investors sought out safe havens in aa knee-jerk reaction to the sight of cruise missiles and bombers targeting Taliban and suspected terrorist sites in retaliation for last month’s terrorist attacks on New York and Washington.

By early afternoon, London’s FTSE 100 index stood at 4,969.9 points, down 1.3 per cent, but well clear of earlier lows.

In Paris, the CAC 40 index lost 1.6 per cent to 4,098.3 points, while Frankfurt’s DAX index gave up 1.6 per cent to 4,414.4 points.

The euro rose to 0.9212 dollars, the price of oil was slightly higher at $21.93 a barrel, while the gold price rose to $292.55 an ounce from 291 in London late on Friday.

But nobody can say that what has happened has come as a surprise, so we are not expecting a return to the post-September 11, nadir, Kerr told AFP.

Markets were hit across the board, with few places for investors to hide. Banks, insurance companies and airlines led the downward descent, but there were few winners as the ‘war on terrorism’ erupted.

European bond markets remained open, and bond yields fell as investors adopted a “flight to quality” stance. The yield on the 10-year German Bund eased to 4.615 per cent compared with 4.645 per cent on Friday.

In a relatively moderate way, the euro gained a bit, the stock markets opened lower and we have seen a ‘flight to quality’ on the bond market, said Nathalie Fillet, a Paris-based bond market strategist with BNP Paribas.

But for the moment we have not had any really big movements, we have to wait a bit to see if it’s something that’s going to last very long, which is going to get bogged down, what are the reactions of the Arab countries, she said.

Among the biggest losers in London were British Airways, which fell another 7.2 per cent to 143.75 pence, Abbey National bank which lost 5.4 per cent to 1,037 pence, insurer CGNU which fell 4.2 per cent to 860 pence, and engineering group Rolls Royce, 5.6 per cent weaker at 138 pence.

In Paris, insurance group Axa was the heaviest faller, down 4.6 per cent at 21.9 euros, while the Frankfurt market was littered with financial fallers including HypoVereinsbank (down 6.1 per cent at 30.87 euros) Commerzbank (down 4.1 per cent at 17.36 euros) and Munich Re (down 3.4 per cent at 286 euros).—AFP