Frankfurt Dax: German shares slumped about 2 per cent after Russian news rattled the market and traders said further weakness is likely today. The Dax closed down 1.93 per cent, while the electronic Xetra Dax was down 2.06 per cent.

German banks were hurt with Deutsche falling 4 per cent and Dresdner plunging more than 5 per cent. Bayer was down 7 per cent after its first-half results missed expectations. Hoechst was down 3 per cent.

Despite this, German bunds spurted to record highs after the warnings from the Russian central bank that some of the country's banks may face collapse.

It was just the kind of signal needed to spur fresh safe-haven trades, traders said.

Paris CAC-40: Paris stocks closed down 0.93 per cent yesterday as investors, unsettled by a slip on Wall Street and new concerns about the Russian economy, moved in to take profits after the market's recent rebound.

A declaration by Russian Central Bank first deputy chairman Mr Sergei Aleksashenko that some of the country's biggest commercial banks could fail soon prompted the CAC's downturn as buyers who had been tempted back by cheap stocks cashed in their profits.

"People heard the news from Russia, saw the Dow slip again and got worried," said one broker.

Milan Mibtel: The Milan bourse ended in negative territory after being dragged lower by a dip in the Dow and other European bourses. Statements from the Russian central bank also made nerves jangle.

Technicals also played a key role in the session which saw very thin trade ahead of the options expiry today.

Among the banks, Creditio Italiano ended positive, closing 0.06 per cent up. BCI closed down 0.41 per cent and Banca di Roma, which was suspended due to an error for a few minutes at the end, closed 0.93 per cent up.