Europe shares slide on warnings, economy fears

At 0937 GMT the pan-European FTSEurofirst 300 index was down 8.5 percent at 798.86 points, having hit its lowest since May 2003 at 796.94 points.

Global stocks tumbled to a new five-year low on Friday and demand for the relative safety of government bonds and low-yielding currencies soared. In Asia Japan's Nikkei slid 9.6 percent on fears over a deteriorating world economy as a financial crisis gathered speed.

Stricken banks led the decline, with HSBC down more than 10 percent, Santander off more than 9 percent and UBS shedding 7.4 percent. The European banks sector dropped 9.2 percent.

"It does shock you ... One hasn't been expecting this," Edward Menashy, an economist at Charles Stanley in London, said of the market's decline.

"The fall in the Japanese market is incredible...The fear today is that the Japanese carry trade is starting to unwind."

Around Europe, Britain's FTSE 100 slid 6.1 percent, Germany's DAX dropped 7.4 percent and France's CAC lost 7.1 percent.

The British economy shrank more than expected and for the first time in 16 years in the third quarter of 2008, official data showed on Friday.

The figures will likely boost expectations that the Bank of England will cut interest rates by another 50 basis points next month as the economy looks like heading into its first recession since the early 1990s.

"Markets have been steeling themselves for that announcement for a considerable period ... (but) the recession to come is going to be much steeper than anyone had anticipated," Menashy said of the British GDP data.

Sterling tumbled to its lowest level against the dollar since 2003 following the data.

Gloom abounded across the continent, with a survey of companies showing the euro zone private sector economy in October took its biggest hit since monetary union, and is on track for its worst performance since the recession of the early 1990s.

AUTO GLOOM

Volvo, the biggest faller in Europe, dropped more than 21 percent after reporting worse-than-expected third-quarter results.

The world number two truck maker's top executive said on Friday the North American market, which has been weak for almost two years, was likely to remain tough in 2009.

Peugeot and Renault 14 percent and 18 percent, respectively, after issuing profit warnings.

Oil shares also tanked as crude prices fell below $66 a barrel, to new 16-month lows, pressured by gloom across all markets about a global economic downturn that could reduce the impact of any cut in oil output from OPEC.

BP, Royal Dutch Shell and Total shed between 6.7 and 7.2 percent.

Miners took a whipping as gold and copper prices tumbled, with Vedanta Resources down 10.6 percent, Kazakhmys off 8 percent and Xstrata down 7.8 percent.

Shares in Ahold were the sole risers in Europe, up 5.4 percent and as the Dutch supermarket retailer posted a 3.9 percent rise in third quarter sales, at the top end of analysts estimates.