European stocks close at lowest level for five-and-a-half years European stocks fell to a five-and-a-half-year closing low yesterday, led down by banks and commodities on concerns over a deep recession, while profit worries punctured BASF and AstraZeneca.

BASF, the world's top chemicals maker by revenue, underlined worries about global demand by cutting its 2008 profit outlook for the second time in two months. It said it would cut back production, citing a "massive" demand drop.

BASF shares were down 13.7 per cent, while drugmaker AstraZeneca slid 11 per cent after it said full-year earnings would be at the lower end of its previously stated range.

The FTSEurofirst 300 index of top European shares closed four per cent lower at 811.99 points - the lowest close since May 2003. The benchmark has fallen more than 45 per cent this year, compared with gains in the previous five years.

Banks were the worst hit yesterday, with BNP Paribas shedding 11.2 per cent, HSBC falling 9.1 per cent, Barclays down 13.3 per cent and Société Générale declining 7.8 per cent. HBOS, however, gained two per cent as Lloyds TSB investors were expected to approve its takeover of HBOS and a government rescue plan, but the UK bank's executives faced a grilling from unions about the potential for up to 50,000 job cuts due to a deteriorating economic outlook.

"The outlook is still very poor and the profit warning from BASF didn't help sentiment," said Edmund Shing, strategist at BNP Paribas in Paris.

"Everyone is staying very defensively positioned and no one is seeing any reason to become more aggressively positioned in risky assets like equities," said Mr Shing.

Gloomy economic data continued to pour in, raising concerns about a prolonged global recession, dampening sentiment and forcing investors to trade cautiously in volatile markets.