Europe's stock indices closed at their lowest level of the year yesterday on concerns consumer and business sentiment could be shaken by security jitters after Israel assassinated the leader of militant group Hamas.
Selling was broad-based, from the consumer cyclicals sector to travel to technology, media and telecoms issues, with the exception of Belgacom, which bucked the glum market to close 4.78 per cent higher in its market debut.
The FTSE Eurotop 300 index of pan-European blue chips finished 1.9 per cent lower at about 958.7 points - its lowest close since December 31 - while the narrower DJ Euro Stoxx 50 index fell 2.1 per cent to about 2,711.5.
Security fears in the wake of March 11's Madrid bombings, and concerns that new attacks could hurt consumer and business confidence, have sparked a selling spree that hammered European equity markets from 20-month highs back to where they started 2004.
"The Eurotop 300 is just below its 50-day moving average," said strategist Bill McQuaker at Credit Suisse First Boston.
"We will never know whether these support lines would have held were it not for the terrorist attacks in Madrid but, in any case, it is hard for us to avoid the conclusion that markets are nearly perfectly balanced, poised to break decisively in one direction or the other."
Across Europe, the FTSE 100 closed 1.9 per cent lower - with more than £20 billion ($37 billion) wiped off the value of Britain's biggest shares. The DAX shed 2.4 per cent, the CAC 40 was 2.1 per cent weaker and the Swiss blue chip index lost 2.7 per cent.
Geopolitical tensions were exacerbated yesterday in the Middle East with Israel's assassination of Skeikh Ahmed Yassin, which added to fears that violence by militants would mount.
British Airways, Air France and travel operator TUI fell between two to six per cent each amid concern that ongoing security fears may put off travellers.
Luxury goods makers Richemont and LVMH, which are exposed to "travel retail" and duty-free sales, shed 5.5 per cent and 2.1 per cent respectively.
But many market observers downplayed the risk for a much sharper sell-off, saying that any positive news on the earnings or economic front would lure investors back to equities.