Leading European stocks were in broad-based retreat yesterday as investor sentiment was bludgeoned again by fresh US profit warnings, worries about the state of the global economy and the threat of war in Iraq.
A weak start on Wall Street following a reduced sales forecast from Wal-Mart, the world's largest retailer, soured the mood even further as concern grew over the health of consumer spending in the United States.
Insurers and banks were the worst hit among European companies, as concern about the crumbling value of their portfolios because of the stock market's decline was compounded by a cash call from French reinsurer Scor.
Tech stocks were also on the ropes after US network equipment maker Extreme Networks Inc warned it would post a quarterly loss, not the profit Wall Street expected, as weak economic conditions restrained revenues.
By 1340 GMT, the FTSE Eurotop 300 index was down five per cent at 817 points. The benchmark index has fallen about 18.5 per cent in the last quarter to levels last seen in April 1997.
The narrower DJ Euro Stoxx 50 index fell 5.8 per cent to 2,206.33.
On Wall Street, the Dow Jones industrial average fell 1.8 per cent in the first few minutes of trade, while the Nasdaq Composite also shed 1.8 per cent.
Swedish insurer and mutual funds group Skandia fell 19.5 per cent after announcing on Friday it will inject $255 million into its US unit, the latest of a string of firms to pour cash into their insurance operations.
The European insurance sector has lost more than half its value this year as weak equity markets have eroded firms' capital and raised doubts about their solvency.
Scor shed almost a third of its value after announcing a 400 million euro cash call to shore up its capital base, while elsewhere in the sector Dutch insurer Aegon sank 7.5 per cent and British peer Royal Sun & Alliance dropped 9.7 per cent.
Banks were also broadly lower. Spain's BBVA and BSCH both fell around seven percent ahead of Brazilian presidential elections on Sunday.
The poll is expected to usher in a left-wing candidate who investors fear will mismanage Latin America's biggest economy and its $260 billion debt pile.
Germany's Commerzbank fell 6.8 per cent after announcing it would be forced to set aside an extra 200 million euros for bad loans.
Tech stocks fell 6.3 per cent, led by German chipmaker Infineon which fell 12.4 per cent, after World Semiconductor Trade Statistics figures showing growth in global sales slowed in August.
Franco-Italian peer STMicroelectronics shed 8.1 per cent and Dutch rival Philips lost 6.9 per cent.
Irish construction and building materials company CRH Plc lost 15.9 per cent after becoming the latest European company to be hit by asbestos claims at a US subsidiary.