European shares slump

European shares slumped to a three-and-a-half year closing low yesterday, with banks weighing heavily, as the fallout from the credit crisis escalated on both sides of the Atlantic.

Financials were battered by news of the part nationalisation of two major European banks and the sale in the US of Wachovia Corp's bank operations to Citigroup, in addition to ongoing liquidity concerns.

Hopes that a US rescue plan could solve the financial sector's problems, as US lawmakers met to vote on the $700 billion bailout proposal, failed to help bank stocks. The bailout plan was in fact later rejected.

The FTSEurofirst 300 index of top European shares closed down 5.23 per cent at 1,047.04 points - its lowest closing level since January 2005.

The benchmark, which is down around 27 per cent this year, also notched up its biggest one-day percentage fall since last January 21.