Germany's Bayer, hit by fear over its exposure to drug lawsuit, led European shares to fresh six-year lows yesterday afternoon, with Swiss Re also a casualty after cutting its dividend.
Wall Street also fell in early trading after disappointing sales figures from computer maker Hewlett-Packard Co..
The threat of war in Iraq, companies cutting their dividends, worries triggered over corporate accounting triggered by Dutch retailer Ahold earlier in the week, and general economic uncertainty combine to keep investors under cover.
Insurers were hardest hit, the sector down three per cent. "There's a wind of panic among investors who never want to hear the word insurance again," said Michael Huttner at J.P.Morgan.
"There has been no end of disappointing news in the sector. Prudential insisted their dividend was safe and then they cut it," he added.
Ahold, the world's third-largest supermarkets group, said the US Attorney General's office was probing the company, adding to the investion also being done by the US market watchdog, the Securities and Exchange Commission.
Ahold shares sank 12 per cent to 2.87 euros, and have shed some 70 per cent of their value since the news of accounting irregularities at a US division broke on Monday.
At 1451 GMT, the FTSE Eurotop 300 index was off 0.8 per cent at 748 points, with declining issues eclipsing advancers by a margin of more than two-to-one in moderate volume.
The narrower DJ Euro Stoxx 50 index shed one per cent to 2,060 points.
On Wall Street, the Dow Jones industrial average dropped 0.6 per cent to 7,862 points. The Nasdaq Composite fell 0.59 per cent to 1,321 points.
Shares in Bayer slid 9.8 per cent to 11 euros, their third straight day of hefty declines, leaving them down 22 per cent so far this week as fear of its exposure to lawsuits stemming from the group's now withdrawn Baycol anti-cholesterol drug.
Yesterday, the firm said it was impossible to forecast the outcome of litigation over the recalled drug, and it might consider provisions for liabilities analysts fear could total billions of euros.
"Nobody knows the actual impact but I think the share fall is an over-reaction," said Gerd Schubert, a fund manager at Deka.
Swiss Re, the world's second largest reinsurer, slipped 9.4 per cent to 69.65 Swiss francs, after disappointing investors with a 2002 loss and a dividend cut.
Several European companies have been punished by investors this week after cutting or threatening to cut their dividend, seen as a remaining reason to hold a company's stock in some cases.
Elsewhere in insurers, Britain's Royal & Sun Alliance sank to their lowest level in 20 years, with Fitch ratings agency cutting its rating on the company's debt due to increasing concern over its ability to execute its wide-ranging strategy.
R&S shares slid 13.3 per cent to 61-3/4. Shares in Anglo-Dutch steel and aluminium maker Corus Group were also under the cosh, tumbling 14.5 per cent to 13-1/4 pence on continuing jitters about the stalled 750 million euro sale of its aluminium arm to France's Pechiney.
On a brighter note, Dutch brewer Heineken rose 5.3 per cent to 31.76 euros after it posted a solid rise in annual profit and forecast further growth this year.