European shares slid to their lowest close in more than three weeks yesterday, dragged down by weaker car and mining stocks as investors continued to fret over global inflation and the outlook for US interest rates.

Bucking the weaker trend, InBev rose after forecast-beating results, while online gaming stocks slumped on fears of a US crackdown after a second Internet gaming executive was detained by US authorities.

"I think that equity investors in general have plenty to be optimistic about, and this could be a great buying opportunity," said Michael Taylor, Threadneedle's head of equities, in a note.

"Companies have been telling us that operating conditions are strong, and this has been borne out in Q2's earnings numbers. Risk appetite is returning now, and volumes are likely to pick up as people come back from their holidays."

The FTSEurofirst 300 index of top European shares ended down 0.9 per cent down at 1,351.32 points.

That marked its lowest close since mid-August, and its third straight losing session as investors locked in the profits of a 10-per cent rally over the past two months.

Across Europe, the FTSE 100 dropped 1.2 per cent as the Bank of England kept interest rates on hold, and as Prime Minister Tony Blair said he planned to step down within a year.

France's CAC 40 fell 1.1 per cent, while the DAX dropped 0.7 per cent.

Among top decliners were car-related shares, with BMW down 1.6 per cent as the world's largest premium carmaker reported a 10.9-per cent fall in group vehicle sales in August.

Volkswagen fell 2.1 per cent, DaimlerChrysler dropped 1 per cent, and Renault slid 2.1 per cent.

Car parts firms also dropped, with Tomkins down 15 per cent after warning its profit would be below forecasts. Valeo fell 4.2 per cent, while GKN dropped 2.9 per cent.

Mining stocks dropped, with Anglo American, Salzgitter and Finland's Rautaruukki down more than 2 per cent after the Finnish steel maker posted a bigger-than-expected fall in second-quarter profit.