Euro Shares Suffer Record One-Day Loss

European shares suffered their worst one-day percentage fall on record on Monday, sinking to 4-year closing lows as investors dumped stocks across the board and Wall Street slid.

The pan-European FTSEurofirst 300 index fell 7.8 percent to close at 1,004.90 points, worse than a 6.3-percent fall on Sept. 11, 2001, the day of the attacks on the World Trade Center buildings in New York.

The index briefly slid below the 1,000 mark for the first time since late 2004 and the Dow Jones industrial average slipped below 10,000 points on Wall Street.

"It's just in free fall. The outlook is still very bearish and we are nowhere near the bottom.

There is no reason to buy anything at the moment. The bid-offer spread is huge," said Nicole Elliott, a technical analyst with Mizuho Securities.

Banks and commodity shares took most points off the index, with Royal Bank of Scotland -- which suffered a credit rating cut from Standard & Poor's -- sliding 20 percent, Barclays losing 14.7 percent and UBS falling 12.8 percent.

BP, Total and Royal Dutch Shell fell 7.7-8.9 percent as oil fell below $90 a barrel to an eight-month low.

"People have decided that markets have no ability to repair themselves and politicians have control of this process," said John Haynes, strategist at Rensburg Sheppard Investment Management. "The buyers have stepped away, and the sellers are still there."

More European governments offered bank deposit guarantees, as regulators from Washington to Seoul scrambled to contain the deepest financial crisis in 80 years.

Germany said it was considering a nationwide "umbrella" to shield its banking sector from market turmoil, a reversal in policy which underscored growing government concerns about financial contagion.

Germany had pledged on Sunday to guarantee private deposit accounts, as it clinched a deal to rescue Hypo Real Estate.

That was followed by similar moves by Austria and Denmark, after Ireland issued the first, albeit broader guarantee last week. But mortgage lender Hypo Real's shares lost 37 percent.

Just 14 stocks of the 312 on the FTSEurofirst index advanced.

The Smell of Desperation?

In one of the biggest cross-border rescues since the full force of the credit crisis swept across the Atlantic into Europe last month, BNP Paribas scooped up Fortis's assets in Belgium and Luxembourg to become the euro zone's biggest deposit bank.

BNP shares lost 5.4 percent; Fortis shares were suspended.

"European governments are looking to stabilize the financial sector by attempting to rescue some major institutions. Whilst their actions are understandable, the smell of desperation remains strong," said Chris Hossain, senior sales manager at ODL Securities.

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UniCredit, Italy's second-biggest bank, also announced plans to raise new capital. Its stock fell 5 percent.

The DJ Stoxx European bank index slumped 8.9 percent to 264.99 points, surpassing an 8.6 percent tumble in September 2001 to post its biggest fall since the start of 1992, according to Thomson Reuters data.

Among other major movers, business software group SAP sank 16 percent after it said it had seen business drop off abruptly.

Auto maker Volkswagen jumped 5.2 percent to top the sparse European gainers list as traders pointed to continued speculation that Porsche was exercising stock options to raise its stake in the group.

The euro hit a fresh 13-month low against the dolla, while a slight fall in London interbank offered rates for three-month dollars provided a faint glimmer of hope that money market strains might be easing but conditions remained poor and lending virtually non-existent.

Investors ignored a $700 billion package to rescue the U.S. financial sector, passed by the U.S. House of Representatives on its second try on Friday and signed into law by President George Bush.

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