European stocks skidded to fresh three-month lows yesterday, dragged down by heightened fears about a war in Iraq, worries about corporate profits and fresh losses on Wall Street.
Insurers bore the brunt of the rout, as investors used a dour earnings report from Italian giant Generali to pummel the likes of Switzerland's Baloise, Germany's Allianz and Dutch firm Aegon.
Europe's largest travel firm, TUI AG of Germany, sank seven per cent after it unveiled a sharp fall in 2002 core earnings and refused to give an outlook for 2003, citing the poor economy and the possibility of war in Iraq.
Broader sentiment was undermined by fears that war in the Gulf was drawing closer.
A Russian military source said Washington and its allies had already decided to launch a month-long military strike from mid-February.
"The market is basically lacking any confidence at the moment," said BNP equity strategist David Thwaites, echoing concerns expressed by other market commentators on the impact of war fears and poor earnings visibility.
"What we're seeing in Europe is that the majority of the sectors have been downgraded in terms of earnings estimates, which provides a difficult backdrop for investors," said Jeremy Podger, a fund manager at Investec Asset Management.
At 1630 GMT, with only Frankfurt still trading, the FTSE Eurotop 300 index was down 1.8 per cent at 812 points, as decliners beat advancers by about five-to-one. It was the benchmark index's lowest close since October 11 last year.
The narrower DJ Euro Stoxx 50 index fell two per cent to 2,281 points.
Strategists, however, reiterated their view that once any war with Iraq was out of the way, investors would switch their focus back to fundamentals and the market could be poised for a bounce back.
"Clearly the markets are starting from a lower level this year and that gives us greater confidence that at some point in the year the stimulative background, particularly in the US, is going to have a positive effect on the market," said Podger.
"But in the first quarter that is counter-balanced by the negative newsflow of the difficult international position and expectations of further earnings estimate downgrades," he added.
Generali, Europe's biggest insurance company, took a rare step towards transparency by unveiling its first industrial plan, but investors were less than impressed by what they saw.