In early afternoon trade only one share had rose while others were in the red. The largest decline was accounted by banks and mid-cap financial stocks.

Of the FTSE 100 shares, financial shares declined heaviest. Northern Rock plc paced decliners plunging 31.5% Friday on weak sentiment, the record low since March 2003. Northern Rock says it expects a below market expectation profit before tax of between 500 million pounds and 540 million pounds, a decline from 588 million pounds achieved last year. Shire plc slid 7.38%, Persimmon, Britain's second-biggest homebuilder shed 6.62% while Barrett Development Bank retreated 4.71%.

Of the index shares, HBOS, the U.K.'s largest mortgage lender, lost 3.6%. Barclays fell 3.59% and Royal Bank of Scotland closed lower at 0.65%.

Other stocks, Reckitt Benckise gained 1.49%, Reed Elsivier rose 1.08%, Smith GRP climbed 0.60%, 31 Group plc was up 0.30% while Kingfisher closed higher at 0.20%.

1:00PM NY, 5:00 PM Frankfurt European markets dropped on global credit crunch, concerns, sparked by Northern Rock.

European stock markets finished steeply lower Friday amid renewed concerns of a global credit crunch, sparked by Northern Rock. The UK mortgage lender dropped 31% after the Bank of England agreed to provide emergency funds to avoid liquidity trouble. Stocks were additionally pressured by China’s central bank’s decision to increase its benchmark interest rate, as well as weaker-than-expected U.S. retail sales. Across the region, the U.K. slipped 1.2%, while both Germany and France lost 0.5%.

In Frankfurt stocks finished down, led by weakness in the financial sector. Deutsche Bank retreated 1.3% after Societe Generale downgraded the stock to sell from hold. Commerzbank dropped 4.1%, as Societe Generale cut its price estimate to 35 euros from 41 euros. Deutsche Postbank shares fell 1.9%. Mortgage broker Interhyp tumbled 33% after it lowered its full-year earnings and revenue outlook.

In Paris stocks declined, paced by banks. Societe Generale led financial stocks down with a drop of 2.2%, followed by BNP Paribas, down 1.5% and Dexia, losing 1.3%.

In London stocks dropped sharply, led by Northern Rock which dropped 31% after the BoE agreed to provide the mortgage lender with a short-term credit line to keep it operating. Other lenders also fell. Shares of Alliance & Leicester dropped 6.9%, HBOS lost 3.6% and Barclays dropped 3.1%. Among other notable movers to the downside, Next slipped 4%, Argos owner Home Retail lost 3.7% and electronics retailer DSG International dropped 3%.

12:30PM New York, 1:30AM Sydney - Australian stocks rose for the second day, as prices for metals and oil increased and the U.S. dollar declined.

In Sydney trading ASX 200 Index gained 1.22% or 72.2 to 6,306.80. The Aussie dollar closed stronger today, recovering from early morning lows on the back of solid demand for the currency from Japan and further weakness in the U.S. dollar. The Aussie dollar traded at $0.8419/25 against the dollar, up from yesterday's close of $0.8396/02.

During the day, it traded between a low of $0.8344 and a high of $0.8425. News on UK mortgage lender Northern Rock's to borrow capital from the Bank of England, lender of the last resort, due to the exposure to the troubled U.S. sub-prime mortgage sector had put pressure on the Aussie dollar. Additional news that Northern Rock would be given a short-term credit line to allow it to maintain operations had initially sent ripples through the market, putting pressure on high-yield currencies such as the Australian dollar.

However the Aussie dollar's fortunes soon changed on the back of demand out of Japan. The demand from Tokyo helped lift the Aussie against the U.S. dollar by boosting confidence in the market and sentiment towards risk. News of a weakening U.S. dollar against expectations that the Federal Reserve may cut interest rates from 5.25 % next week also helped turn the tide in the favor of the Aussie dollar.

Lower interest rates can weaken a currency by giving investors lower returns on investments denominated in that currency.

Of the Sydney shares, Commander Comm led the gainers with a rise of 7.22% followed by Centennial Coal at 6.83% higher, APN/UKA European rose 6.36% with Mount Gibson and Macquarie 6.27% and 6.18% respectively. Mining giant BHP Billiton and Santos Ltd led from the front riding on increases in the prices for metals and oil as the U.S. dollar declined. BHP, the world's biggest mining company and Australia's largest oil producer, rose 1.94% and Rio Tinto Group, the third-largest Australian oil producer, added 1.43% and Santos, gained 2.30%.

Crude closed above $80 a barrel in New York for the first time, after Hurricane Humberto shut three refineries in Texas.

Macquarie, Australia's largest securities firm jumped 6.2% on the predictions that its first half earnings will be stronger on growth in investment banking fees and the specialist funds it manages. It is expecting an around 40 percent jump in net income within the six months ending September 30 from A$730 million ($610 million) a year ago.

Of the ASX 200 index stocks, Incitec Pivot Lt fell 1.48% followed by Bolnisi Gold down 2.19%, Tishman Speyer sank 2.20 % followed by Duet Group down 2.33% and Sino Gold Mining lost 3.59%.

11:30AM U.S. stocks eased some of the early losses on strong consumer confidence.

U.S. stock averages traded lower amid renewed fears of a global credit crunch. Financial stocks suffered weakness after UK mortgage lender Northern Rock turned to the Bank of England for an emergency loan to avoid liquidity trouble. The company also issued a profit warning. Following the news, Merrill Lynch (MER: chart) shares fell 1.6%, while Lehman Brothers (LEH: chart) slipped 2%. Merrill Lynch said its Q3 profit could be hurt by a move of adjusting the value of securities linked to risky subprime mortgages.

However, the market erased some of the earlier losses, benefiting from a stronger-than-expected consumer confidence reading. The preliminary consumer confidence index rose to 83.8 in September up from 83.4 in August, exceeding the average analyst estimates. In another report, the Commerce Department showed retail sales, excluding vehicles, fell more than expected in August.