European shares were broadly weaker yesterday afternoon, dragged down by growing anxieties about what impact a protracted war in Iraq will have on the global economy.
Car makers were among the big losers, hit by a sharp fall in French car maker Renault after it warned of slowing demand because of the war.
European aerospace firm EADS topped the losers board, hit by worries that the conflict would hem in demand for commercial planes, while Munich Re was among the big decliners in the insurance sector, sinking 6.2 per cent after it posted weaker-than-expected profits.
Among flailing energy stocks, Spanish oil company Repsol shed 4.7 per cent as the market absorbed a placing equivalent to three per cent of its capitalisation.
"The market is nervous. The lack of direction in the war is translating into a lack of direction for the market," said Florian van Laar, an asset manager at Eureffect in Amsterdam.
"We're not seeing any aggressive selling. It's more a lack of buying that is dragging this market down," he said.
By 1433 GMT, the FTSE Eurotop 300 index of pan-European blue chips was down 2.1 per cent, while the narrower DJ Euro Stoxx 50 index lost 2.8 per cent.
The Eurotop 300 bounced by as much as 19 per cent after closing at a six-year low on March 12, but has come off moderately this week as hopes for a short war have faded.
Opening losses on Wall Street compounded the market's woes. The Dow Jones industrial average fell one per cent and the tech-laced Nasdaq shed 0.9 per cent in the first few minutes of trade, weighed by worries about a long war in Iraq.
US-led forces are amassing for a final push on Baghdad, but US President George W. Bush on Wednesday warned that the war was "far from over".
"There is more resistance in Iraq than investors had assumed and there is the threat US-led forces could get bogged down in urban warfare," said Theodoor Gilissen Bankiers' Gast.
The International Monetary Fund said in a report that a lengthy war in Iraq and spreading terrorism could undermine the fragile global economic recovery and further depress financial markets.
A steep fall in the dollar also could destabilise markets that already are struggling to recover from the bursting of the asset price bubble, the Fund said in its Global Financial Stability Report, which monitors economic risk.
Renault fell 4.6 per cent after it said the war in Iraq meant demand in the US and Europe would likely be at the lower end of forecasts for fiscal 2003-2004 that the company gave in October.
Rivals Volkswagen lost 3.9 per cent, DaimlerChrysler fell 2.7 per cent and Porsche ditched 6.7 per cent.
Munich Re was Europe's biggest blue-chip decliner, down seven per cent after the world's biggest reinsurer posted a disappointing 2002 net profit of €1.1 billion and said it expected to make significant writedowns in the first quarter.
Shares in Air France fell 5.2 after the French airline warned late on Wednesday that it might not meet its profit target for this year due to weak market conditions aggravated by the war in Iraq. It unveiled plans to slash capacity and delay delivery of seven Airbus jets.
That hurt European aerospace firm EADS, 80 per cent of Airbus. Its shares sank 7.8 per cent.