€200 billion in market value lost in one day

European shares fell sharply yesterday, wiping out more than €200 billion in market value in their biggest one-day slide since the September 11, 2001 attacks, as fears of a US recession sparked a broad-based sell-off.

The FTSEurofirst index index of top European shares closed unofficially down 5.3 per cent at 1,286.14 points, having hit an 18-month low of 1,278.79 earlier in the session.

Germany's DAX lost seven per cent, Britain's FTSE fell more than five per cent and the French CAC 40 dropped almost seven per cent.

The slide in these three national blue-chip indexes led to a loss in market capitalisation roughly equal to the combined gross domestic product of Ireland and Romania.

Switzerland's benchmark index fell over five per cent, Milan's MIB 30 was down five per cent and Spain's IBEX dropped nearly seven per cent.

The sell-off tracked global equities losses, as the MSCI's main index of world stocks hit its lowest level in over a year.

Banks were the worst sector, contributing a quarter of the index's losses. And heavyweight energy stocks were among the top individual negative weights, with BP down 4.6 per cent and Total 4.5 per cent.

Investors were left with little in terms of safe haven options: utilities, seen as a possible defensive hedge in times of strife, also fell, with Germany's E.ON sliding six per cent.

"Getting pummelled," said Henk Potts, equity strategist at Barclays Stockbrokers. "A mixture of weak global economic data, poor corporate data, increasing fears about the possibility of a recession... have left investors drowning in a sea of red."

"This looks like a climax sell-off," said Brewin Dolphin chief strategist Mike Lenhoff, adding that the slump looked overdone.

"People are left to hold oversold positions until they're blue in the face - interest rates are going to be a lot lower by the year-end and some of these valuations could look silly then."

Yesterday's fall is the index's eleventh drop in 14 sessions. It has already lost nearly 15 per cent this month. Insurers slid on fears over their bond exposure as investors sold off following news that a unit of Ambac Financial Group had lost a crucial "AAA" rating.

Swiss Re sank nearly 10 per cent, while Allianz lost 9.5 per cent.

Banks took a beating again on Monday, with the DJ Stoxx bank index down 5.6 per cent. HSBC fell 4.9 per cent and Santander dropped 7.5 per cent.

Societe Generale, which lost eight per cent on Friday on market rumours that the French bank could report write-downs, lost a further eight per cent.

"It's becoming more and more difficult as the market is now in panic mode," Hugues Rialan, managing director in charge of discretionary asset management at Robeco France.

"We're falling back into the crisis of confidence in the financial sector.

The banks have been reassuring the market over their exposure to US mortgage-related investments, but now we realise there is nothing reassuring about it," he said.

Among the few stocks on the upside, Friends Provident rose four per cent after US private equity firm JC Flowers said it was considering an offer for the group.

Swedish trucks group Scania rose 2.2 per cent on renewed speculation of a tie-up with former suitor MAN.

Oil slid by almost $2 to a six-week low below $89 a barrel yesterday as stock markets fell and concern mounted over an economic slow-down led by top consumer the United States. Stock markets across the world took a battering as anxiety spread that a fiscal stimulus plan proposed by US President George W. Bush last week would not be enough to prevent a recession.

US crude fell by $1.57 to $89 by 1417 GMT in electronic trade, just off a session low of $88.67, which was the lowest level since December 11. Oil has dropped by more than 10 per cent from a record high of $100.09 hit on January 3.

London Brent crude was down $1.29 at $87.94.

Floor trading on the New York Mercantile Exchange (NYMEX) was shut yesterday for the Martin Luther King Jr holiday.