European stocks fell 2.2 percent on Tuesday, ending at their lowest close since October 2005 as fears of asset writedowns returned to haunt the banking sector, while strong oil prices continued to stoke inflation concerns.
Banks took yet another beating, with UBS hitting 10-year lows, down 5.3 percent, while Deutsche Bank lost 4.4 percent as talk swirled that more hefty writedowns stemming from the credit crisis could further hit second-quarter earnings within the banking sector.
France Telecom bucked the trend, featuring among the very few stocks on the upside as several brokerages upgraded their rating on the stock after the company dropped its takeover offer on Nordic telecoms operator TeliaSonera.
The FTSEurofirst 300 index of top European shares closed 2.2 percent lower at 1,175.55 points.
The index, which has fallen in seven of the last 10 sessions, has tumbled about 22 percent so far in 2008.
"The impact from the U.S. subprime market debacle is far from over, especially for retail banks and insurers, while investment banks have already unveiled big writedowns," said Romain Boscher, head of equity management at Groupama Asset Management, in Paris.