European stocks slumped yesterday afternoon as insurers fell amid fears of more capital hikes and technology firms dropped as software giant Oracle's bleak outlook fuelled fears of weak growth prospects.
Further losses on Wall Street following Oracle's news, and a profit warning from investment bank J.P. Morgan compounded investors' misery.
Strategists worried that the recent slew of poor economic data will mean that consensus estimates for corporate earnings will have to fall further.
"There is still evidence that analyst forecasts of corporate earnings were still too high considering the economic backdrop," said Gareth Evans, European equity strategist at ING Barings in London.
French insurer Axa, the world's biggest reinsurer Munich RE and French telecom equipment maker Alcatel were among the biggest blue-chip fallers in Europe.
On Wall Street by 1333 GMT, the Dow Jones Industrial Average index was 0.66 per cent lower and the tech-heavy Nasdaq Composite was 1.3 per cent weaker.
The FTSE Eurotop 300 index tumbled 2.67 per cent to 872.6 points, near its worst level for the session. The index is less than six per cent away from its five-year nadir hit during late July after the summer's 20 per cent rally slammed into reverse.
Stock market commentators expect those five-year lows to be tested in the medium term if the economic data and profit outlooks continue to darken.
"The technical picture is very weak and European equity markets could lose another 10-15 per cent across the board," said Thomas Anthonj, a pan-European technical analyst at ABN AMRO based in Amsterdam, noting that the DJ Euro Stoxx 50 could well test levels last seen in October 1997 or even in April 1997.
"If we fall through support levels at 2,412 points and 2,371 points then that would be a signal we are heading for five-year lows."
The DJ Euro Stoxx 50 index dropped three per cent to 2,416 points.
Sectors typically linked to the early stages of economic recovery, such as basic resources and consumer cyclicals were also hit.
European insurers hit multi-year lows as Aegon's failure to drum up strong support for its capital hike illustrated investors' waning appetite and as weak results from Swiss Life pummeled sentiment.
The DJ Stoxx insurance sector fell 4.68 per cent to record lows.
Banks came under pressure after U.S. peer J.P. Morgan's profit warning.
Shares in Dutch ABN AMRO slid 5.5 per cent, while France's BNP Paribas was down 4.7 per cent. Swiss UBS AG shed 5.1 per cent.
Meanwhile, shares in Nestle rose 3.2 per cent after news that the controlling shareholder in U.S. chocolate maker Hershey was ending its auction of the company.
The Swiss food giant was seen as leading bidder for Hershey. Vivendi Universal rose 4.6 per cent after it won a three billion euro medium-term loan facility from 11 banks.