Europe's top stocks were thumped to new six-year lows yesterday as investors confused by the standoff in Iraq headed for the exits, while a merger plan between Telecom Italia and Olivetti was roundly booed.

London's FTSE and Frankfurt's blue-chip DAX were among the hardest hit, both dropping more than four per cent. The UK benchmark index fell up to five per cent in one of its biggest percentage drops in the history of the index.

"There's one word for it - carnage. It's horrible," said Richard Wright, head of CFD at brokerage GNI in London.

"Nobody has any confidence. Nobody wants to buy anything and if they do buy anything they're wrong within about 10 minutes. It's fairly gloomy," said Wright.

French utility Suez topped the blue-chip loser-board on concerns it may be facing a cash crunch, while German drugs and chemical firm Bayer tumbled after it announced it was being sued over alleged securities violations.

Traders blamed the dire mood on uncertainty about Iraq, withering confidence in the corporate sector and a sluggish world economy - a litany of woes that has tugged the FTSE Eurotop 300 index down 20 per cent so far this year.

By 1703 GMT, with only Frankfurt still trading, the Eurotop 300 index was down 3.5 per cent at 682.40 - a fresh six-year low - as losers eclipsed gainers by six-to-one. Volume was above average at 3.2 billion shares.

The narrower DJ Euro Stoxx 50 index sank 4.4 per cent to 1,849.46 points.