Finance and Economic

Fears that the credit crisis is back rattled financial markets on Tuesday as a newspaper report added to previous woes by suggesting that U.S. giant Lehman Brothers may need to raise nore capital.

Equities were lower, bonds got a boost from investors seeking safety and the Japanese yen strengthened in a display of investor risk aversion.

The Wall Street Journal reported that Lehman Brothers (LEH.N: Quote, Profile, Research) 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: Quote, Profile, Research) chief executive. Monday also saw UK mortgage lender Bradford & Bingley (BB.L: Quote, Profile, Research) slash its emergency fundraising price to get a private equity lifeline.

“We don’t seem to have left all the problems with the banking system, as looked likely a few weeks ago,” said Edward Menashy, economist at brokerage Charles Stanley.

Investors had been looking past the credit crisis that hit last year when U.S payday loans. subprime mortgages began to unravel, focusing instead on slowing economies and inflation fears.

MSCI’s main world stock index .MIWD00000PUS was down around 0.1 percent and the emerging markets equivalent .MSCIEF shed nearly 1 percent.

European stocks FTEU3 were slightly lower. Japan’s benchmark Nikkei average .N225 had earlier closed down 1.6 percent. 

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