European stocks sink on banking sector jitters

European stocks sank more than four per cent yesterday, ending at their lowest close in two-and-a-half years as the fire sale of troubled Wall Street firm Bear Stearns sparked a sharp sell-off among banking stocks.

But the biggest casualty of the session was German engineering group Siemens, which plummeted 18 per cent after project delays and cancelled orders prompted it to issue a profit warning.

The FTSEurofirst 300 index of top European shares unofficially ended 4.2 per cent lower at 1,202.54 points. The benchmark index has lost about 20 per cent since the start of the year, on track to record its worst quarterly performance since the third quarter of 2002.

JPMorgan Chase & Co said on Sunday it would buy stricken rival Bear Stearns for a rock-bottom price, fuelling concerns that the global credit crisis could worsen.

"There is no doubt that the Bear Stearns scenario could happen in Europe," said Marie-Pierre Peillon, head of equity and credit research at Groupama Asset Management, in Paris.