European shares lose one per cent; Bear sparks bank worries

European shares closed about one per cent lower in a volatile session yesterday after news of emergency financing to Bear Stearns stoked fresh worries about the impact of the credit crisis on banks.

The FTSEurofirst 300 index closed unofficially down 0.95 per cent at 1,256.37 points having swung in and out of positive territory.

JPMorgan Chase & Co and the Federal Reserve Bank of New York yesterday agreed to provide emergency financing to Bear Stearns after the investment bank said its cash position had deteriorated sharply, sending its shares into freefall.

A 50-per cent drop in stocks of the fifth-largest US investment bank poured gloom over the financial sector on both sides of the Atlantic and banks were the biggest drag on the European index.

UBS - which has been a notable victim of the credit crisis among major European banks - was down more than seven per cent. HSBC fell 1.9 per cent, HBOS shed 6.1 per cent, BNP Paribas lost 2.5 per cent and Barclays dropped 3.9 per cent.