European shares fell yesterday, securing their worst quarterly performance in over five years, as renewed concern about the credit crunch hit bank stocks and a broker downgrade dragged down Vodafone.

The FTSEurofirst 300 index of top European shares ended down 0.4 per cent at an unofficial 1,260.39 points, bringing its quarterly loss to 16 per cent, its worst quarterly performance since the third quarter of 2002 and the fifth monthly fall in a row. This would be the longest losing streak in the index since a six-month stretch of losses from April to September 2002 and the most volatile month since October 2003.

"You can break the market down into two components. You've got the credit crunch affecting financials and then you've got the economic slowdown," said Kevin Lilley, a portfolio manager at Royal London Asset Management who helps manage €1.1 billion.

"We are now five years into this current economic cycle and I just think people's estimates are way, way too high," he said, adding: "It is difficult to see the market making major headway when there are going to be major downgrades coming through."

London's FTSE 100 index rose 0.2 per cent, bringing its quarterly loss to 11.7 per cent, while Frankfurt's DAX fell 0.4 per cent, bringing its quarterly loss to 19 per cent and Paris's CAC 40 rose 0.2 per cent, which brought its quarterly loss to 16 per cent.