European shares slid yesterday, led by banks and oil firms that fell on worries of more losses and a darkening economic outlook, and as Wall Street fretted over changes to a $700 billion financial sector bailout.

The FTSEurofirst 300 index of top European shares ended 3.36 per cent lower at 853.88 points.

Credit Suisse led banks lower with an 8.8-per cent fall on market talk of a large trading loss. The bank declined to comment.

French bank Natixis slid 13.5 per cent after it said its core investment banking unit had a torrid time last month, while Barclays, Standard Chartered, Deutsche Bank and Societe Generale fell 5.2-7.5 per cent.

Swiss Life tumbled 20 per cent after warning on profits and ING fell four per cent after posting its first quarterly loss.

US Treasury Secretary Henry Paulson said he was backing away from buying troubled mortgage assets using a $700 billion bailout fund, instead favouring a second round of capital injections into financial institutions that would match private funds.

"This is bringing uncertainty into the market, creating a sense that the Treasury doesn't know what it's doing," said Philippe Gijsels, strategist at Fortis in Brussels.

But he said that markets appeared to be overreacting.

"Now people are talking of re-testing the year lows. But news flow should improve in the next couple of weeks with the earnings season behind us and the economic calendar quite light. We should be higher by the end of the year."

Top US electronics chain Best Buy Co. slashed its fiscal 2009 profit forecast, underlining a weak picture of consumer spending.