Banking woes push stocks towards 21-month low

By Natsuko Waki

LONDON (Reuters) - World stocks fell towards this week's 21-month low on Thursday as fresh concerns resurfaced over the financial sector -- the epicenter of the nearly one-year-old credit crisis.

Woes at top U.S mortgage lenders intensified overnight as Fannie Mae (FNM.N) and Freddie Mac (FRE.N) fell 13 and 23 percent respectively on concerns the two home finance firms may need to raise tens of billions of dollars of new capital.

Merrill Lynch MER.N -- among several banks which report earnings next week -- saw its shares fell nearly 10 percent after Fitch Ratings said it may cut the bank's debt rating given expected writedowns and diminished prospects for earnings.

"Sentiment is bad, that's it. I don't see how we are going to get out of this anytime soon," said Giuseppe-Guido Amato, analyst at Lang & Schwarz in Dusseldorf.

"The old problems are still the new ones. People said that with the rescue of Bear Stearns, this was the beginning of the end. What rubbish! We see now that we are only at the end of the beginning. This is to be continued."

The FTSEurofirst 300 index .FTEU3 fell 1.8 percent while MSCI main world equity index .MIWD00000PUS fell 0.5 percent to stand just above Tuesday's 21-month low.

U.S. stock futures rose across the board SPc1, pointing to a firmer start on Wall Street, after Wal-Mart (WMT.N), the world's biggest retailer, raised its second-quarter profit outlook.

MSCI world equity and other indexes in the United States have fallen in the past few weeks to stand down 20 percent from their peaks, joining their European and Japanese counterparts to plunge into bear market territory.