EUROPEAN STOCK MARKETS are generally trading in positive territory this morning, though new worries about the future of the French banking sector has seen share prices fall in Paris.

At 12:30, the Irish Stock Exchange in Dublin was trading down with a 1 per cent drop in the ISEQ index, while in London the FTSE 100 was regaining some of the ground lost yesterday, having risen by just under 1 per cent.

Similar modest gains were recorded in Frankfurt, where the DAX was up by 0.9 per cent, but in Paris the CAC 40 was hovering around the 3,000-point mark – a minor loss on yesterday – given the worries over its banking sector.

Shares in Societe Generale, one of its largest banks, are down by 5 per cent after shedding 19 per cent of its value yesterday, amid rumours that it had sought a meeting with president Nicolas Sarkozy amid concerns over its viability.

Bloomberg quoted the bank’s CEO Frederic Oudea who described the rumours as “absolute rubbish” – and said France had been buoyed buy the news that it was to retain its AAA rating with both Moody’s and Standard & Poor’s.

It also quoted a market strategist who said that “speculators were willing to find a scapegoat” to blame for the potential loss of the AAA rating.

SocGen’s shares had earlier risen by as much as 8.5 per cent but slipped back into negative territory a few hours into trading.

BNP Paribas and Credit Agricole, which had also opened higher, also followed SocGen by falling into the red after early gains.

Last night Sarkozy gave his finance and budget ministers a week to come up with new measures cutting the country’s budget deficit, in a bid to bolster the AAA status.

The cost of borrowing for the French government has fallen this morning – to 3.03 per cent for a 10-year bond – while the cost of borrowing for Italy fell to 5 per cent for the first time in five weeks.

Asian markets fell overnight, with markets in Tokyo, Singapore and Hong Kong all making small losses, though Shanghai closed with a 1.3 per cent gain. US futures markets were making small gains at lunchtime.