European shares closed sharply lower on Tuesday, pressured by banking and commodity stocks, as a poor corporate outlook worldwide and a flurry of grim economic data raised concerns about a deep global recession.
The FTSEurofirst 300 index of top European shares ended 4.2 percent lower at 883.56 points, after rising 0.9 percent on Monday.
The index has lost 41 percent this year, hammered by the credit crisis and resulting economic slowdown.
The banking sector took the most points off the index, with Lloyds falling 9.1 percent, HBOS slipping 7.9 percent, UBS falling 8.4 percent and HSBC shedding 5.3 percent.
Commodity stocks were also under pressure, tracking a sharp decline in crude and metals prices.
"There is no surprise that investors continue to be spooked by a wave of disappointing economic data, and forecasts in terms of economic growth around the world continue to come down," Henk Potts, equity strategist at Barclays Stockbrokers, said.
"In the short term, you have to believe that equity markets will continue to be under pressure," Potts said.
Weak economic readings from China, Japan and Britain and a grim corporate outlook lifted fears of a prolonged recession.
Chinese import growth slowed in October, while in Japan, exports fell nearly 10 percent in the first 20 days of October and corporate bankruptcies jumped 13.4 percent year-on-year.
Data showed German analyst and investor sentiment about the outlook for Europe's largest economy improved but remained gloomy, while British retail sales fell by the biggest amount in more than three years last month, and home sales slumped to their lowest level in at least 30 years.
Italy's biggest bank Intesa Sanpaolo joined domestic rival UniCredit in taking tough steps to shore up its financial strength, saying it would not issue a cash dividend. Its shares closed flat after slumping nearly 17 percent earlier in the session.
InterContinental Hotels, the world's largest hotelier, warned of a sharp fall in October trading as the global economic slowdown hit the hotel industry. Its shares were down 7.6 percent.
"The question is whether things are really as bad as the market would suggest, and the answer is probably no, but no-one is prepared to put their neck on the line and put big bucks on it," said Edmund Shing, strategist at BNP Paribas, in Paris.
But mobile group Vodafone was a standout gainer, up 6.2 percent after reporting first half results slightly ahead of expectations and saying it would focus on cost cuts to maintain profits as it lowered its guidance on full-year revenue.
Energy Weak, Commodities Suffer
Energy stocks were under pressure, tracking crude prices that tumbled as investors refocused attention on the prospect of widespread recession, which is likely to cut oil demand in many developed economies.
Shares in BP, Royal Dutch Shell, gas producer BG Group and Tullow Oil shed between 3.9 and 9.8 percent.
Miners also declined in line with a 6.8 percent drop in copper prices, a 1.9 percent fall in aluminium prices, a 5.7 percent drop in nickel prices and a 2 percent dip in gold.
BHP Billiton, Anglo American, Vedanta Resources, Lonmin, Kazakhmys, Xstrata, Antofagasta and Rio Tinto fell between 7.3 and 14.4 percent.
Among individual stocks, Spain's Banco Santander was down 7.1 percent, extending its decline from Monday, when it announced a $9 billion rights issue. Deutsche Lufthansa fell 5.9 percent.
A source familiar with the matter said the company had temporarily broken off talks to buy Scandinavia's loss-making airline SAS.