Credit worries rattle markets again

By Natsuko Waki

LONDON (Reuters) - Fears of a resurgence in the 10-month-old credit crisis haunted financial markets again on Tuesday as a newspaper report added to previous woes by suggesting that U.S. giant Lehman Brothers may need to raise more capital.

World stocks fell to their lowest in almost a week and the Japanese yen strengthened in a display of investor risk aversion, although bonds turned lower after euro zone first-quarter growth data was revised up.

The Wall Street Journal reported that Lehman Brothers LEH.N may raise $3-$4 billion in fresh capital and suggested the bank could post its first quarterly loss since going public.

The report followed Monday's Standard & Poor's debt rating downgrade of three big securities companies and the ouster of number four U.S. bank Wachovia's WB.N chief executive. Monday also saw UK mortgage lender Bradford & Bingley BB.L slash its emergency fundraising price to get a private equity lifeline.

"Markets still remain pretty volatile," said Henk Potts, equity strategist at Barclays Stockbrokers.

"There's still concern about the fact that the credit crunch continues to claim victims ... and concern about the fact that the economic outlook looks as if it's deteriorating."

MSCI's main world stock index .MIWD00000PUS was down 0.18 percent and the emerging markets equivalent .MSCIEF shed nearly 1 percent. European banks .SX7P fell 0.6 percent, hitting fresh two-month lows.

European stocks lost 0.1 percent, tracking Asian stocks .MIAPJ0000PUS which fell 1.5 percent.