European stocks slumped across the board yesterday to close sharply weaker as higher commodity costs sparked worries about corporate profit growth, while losses in US stocks also hit the broader market.

The pan-European FTSEurofirst 300 index closed 1.1 per cent lower at 1,367.3 points, its lowest level since March 28. The fall came amid strong volumes of about three billion shares, with financial shares leading losers.

"The market just seems to be waking up to the risk of rising commodity prices. The selling is across-the-board," said a Paris-based trader.

European stocks have stalled in the last two weeks on speculation of further hikes in global interest rates after rallying about 18 per cent in the previous five months on a wave of takeovers and robust corporate earnings growth.

The FTSEurofirst index suffered its worst percentage fall since February 28, when the benchmark fell 1.4 per cent.

Baring Asset Management said stock markets might ease as the trend towards higher global interest rates hits home, but this could provide an opportunity to increase equity positions.

"We believe that equities continue to remain more attractive than bonds," Percival Stanion, head of asset allocation at the fund said in a note.

On Wall Street, the Dow Jones industrial average was down 0.4 per cent at 11,095 points and the tech-laced Nasdaq Composite index lost 0.9 per cent to 2,312.3 points.

Copper prices hit a record $6,001 a tonne and gold rose to $600 an ounce for the first time since 1980 as investment funds scrambled for alternatives to stocks, bonds and foreign exchange.

US crude oil prices neared record highs, but then eased to $68.5 per barrel towards the close of European stocks trading.

The threat of a political gridlock in Italy and weak data in Germany also put pressure on European stocks.