European shares fell for a second consecutive session yesterday as developments in the Japanese and Russian economic crises looked set to come to a head at the weekend.

After tracking Asian bourses lower in the morning, European shares bounced back on news US wholesale prices unexpectedly eased 0.1 per cent in June, the first fall for three months.

The recovery was short-lived after the Dow Jones Industrials Average fell in early trading and Treasuries weakened as investors worried about a higher-than-expected core inflation figure.

British stocks were weak all day on concern that domestic interest rates could rise soon despite Thursday's decision by the Bank of England's monetary policy committee to leave the repo rate unchanged.