European shares slide 4%

European stocks skidded with Wall Street after dire US unemployment data signalled deepening cracks in the world's largest economy, knocking banks and oils.

The pan-European FTSEurofirst 300 index closed down four per cent at 793.94 points. A credit crisis has sliced about half the value off the European stock market so far this year as major economies around the globe grapple with recession.

US employers axed payrolls by 533,000 in November for the weakest performance in 34 years, government data showed, as the economy battles its worst crisis since the 1930s.

Wall Street indices were two to three per cent lower when the European market closed for the day. Among Europe's banks, BNP Paribas, Royal Bank of Scotland and Barclays fell between six and 7.5 per cent.

Across Europe, the FTSE 100 index fell 2.7 per cent, Germany's DAX lost four per cent and France's CAC 40 fell 5.5 per cent.

The US Labour Department said the unemployment rate rose to 6.7 per cent last month in the highest reading since 1993, compared with 6.5 per cent in October, after widespread losses across the country's major industry sectors.

"Markets received a jolt of pain as US employment numbers came in," said David Evans, market analyst at BetOnMarkets.com.

"Today's figures were the worst for three decades and are yet another instance to add to the ever-growing pile of 'once in a generation' type extremes that we've seen in 2008."

Energy stocks were the biggest fallers on the index as crude fell beneath $41 a barrel to its lowest level since December 2004.

BG Group, BP, Royal Dutch Shell, Tullow Oil and Total slumped between six per cent and 8.9 per cent.

Miners fell as copper tumbled on poor demand outlook and gold also dropped. Xstrata, BHP Billiton and Kazakhmys all fell between 6.9 and 8.7 per cent.

Among gainers in Europe, BT rose 2.1 per cent. Ofcom, Britain's communications regulator, has proposed increasing the wholesale prices that BT charges other telecoms providers to cover the impact of inflation and rising costs over the last three years.

Credit Suisse raised its rating to "neutral" from "outperform".

Some defensives gained, with GlaxoSmithKline up 1.9 per cent and Shire rising 1.7 per cent.

On Thursday, the European Central Bank slashed interest rates by 75 basis points to 2.5 per cent, while the Bank of England cut rates by 100 basis points to six per cent.

"Against the backdrop of falling economic forecasts softening labour markets, reduced household demand (and) the continuation of the deleveraging programme that's taking place, equity markets inevitably are going to remain under pressure and volatile over the course of the next few months," said Henk Potts, equity strategist at Barclays Stockbrokers in London.

"You can't really identify a catalyst for turning around the equity market at least until the middle of 2009, despite the fact that valuations look very cheap. The rule of thumb is to remain defensive," Mr Potts said.