European stock markets neared last week's six-year lows yesterday as auto makers led shares down in light trade after bombings in the Philippines unnerved investors ahead of a potential US-led war in Iraq.
"The market is nervous and finds it difficult to shrug off news like this," said Robert Kerr, European equity strategist at Banc of America, after a bomb blast at an airport in the strife-torn southern Philippines killed at least 18 people.
Auto stocks such as Germany's BMW and France's Renault were among Europe's biggest fallers after data showed a slump in sales in the key US market.
Amsterdam underperformed other markets as the accounting irregularities revealed last week at Dutch grocer Ahold continued to pummel the stock and as insurers Aegon and ING were hit by fears about their exposure to Ahold's bonds and falling stock markets.
At 1645 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index of pan-European blue chips was down 2.0 per cent at 753 points as falling stocks trounced risers by around eight to one.
That left the Eurotop 300 benchmark just five points off last Wednesday's trough, its lowest close since January 1997.
The narrower DJ Euro Stoxx 50 index dropped 2.3 per cent to 2,092 points. Increased activity by private equity funds signalled assets were cheap at current prices, even though weak trading volumes showed institutional investors remained reluctant to buy stocks, said Nick Nelson, an equities strategist at CSFB.
"It's hard to see any immediate catalyst out there that would change things because of the looming threat of a US-led war in Iraq," he said, despite widespread expectations that the European Central Bank will cut interest rates this Thursday.
The United States is pushing for a vote next week on its UN resolution authorising an attack on Iraq, and US and British forces are massing nearby.
But some undecided nations are still hoping for a compromise that would delay military action, and Russia warned it might be prepared to use its veto in the UN Security Council.
There are also indications that the Turkish parliament may reverse a weekend vote next week and allow the stationing of US troops on Iraq's northern border.
The DJ Stoxx auto index was easily the region's weakest sector, tumbling almost six per cent on the back of deteriorating sentiment in the United States, where light vehicle sales sank seven per cent last month.
German luxury car manufacturer Porsche slid 14 per cent after it said its US sales sank 37 per cent last month. The company sells about half of its cars in North America.
Bigger rivals BMW, Renault, and Peugeot slid between six and 8.5 per cent each.
Also doing badly was the equity-heavy insurance sector, where stocks continued to be subdued by worries about their exposure to sinking equities.
Axa, Allianz and Swiss Re fell between 4.9 per cent and 5.9 per cent each.
Dutch giants ING and Aegon, which were further burdened by Ahold-linked concerns, both fell nearly seven per cent.
Ahold dropped 9.7 per cent as the US authorities widened their investigations into the scandal-tainted Dutch retail giant.
Smaller British peer Britannic bucked the trend and leapt nearly 16 per cent as the group reassured investors it could maintain solvency margins.
Among other big fallers, TUI shares sank 6.7 per cent to their lowest level in over a decade after Europe's largest travel firm said group bookings for the summer season were slightly below the previous year's level. UBS Warburg also slashed its price target on the stock to seven from 11 euros.
Fear of a war in Iraq has hit the tourism industry particularly hard in recent months, with many clients putting off travel plans.
Meanwhile, French advertising group Havas tumbled 9.1 per cent amid signs a slump in its industry will not end this year and on renewed concerns over its convertible bonds.
In New York, the Dow Jones industrial average fell 1.0 per cent and the tech-laced Nasdaq Composite eased 0.4 per cent.