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European shares suffered their biggest one-day percentage decline in more than four years on Friday, fuelled by fears of a liquidity crisis stemming from problems in the US subprime mortgage market.
Banking shares were among the worst hit, with Barclays down 6.4 per cent, ABN AMRO down 3.5 per cent and Societe Generale declining 5 per cent.
Mining stocks such as Rio Tinto and BHP Billiton slid more than 6 per cent amid falling metal prices as investors feared a possible credit crisis could affect the overall economy, hampering growth.
The pan-European FTSEurofirst 300 index closed down 3.04 per cent at 1,479.40 points, its biggest one-day slide since May 2003. The close is 9.5 per cent below a 6-1/2 year high of 1,635.58 the index hit on July 13.
Central banks worldwide pumped money into the banking systems for the second day in a row to fend of a global credit crisis, injecting at least $323.3 billion in the past 48 hours.
The US Federal Reserve provided the banking system with $35 billion in two cash infusions on Friday and said it stood ready to do more if needed.
The ECB injected 61.05 billion euros ($83.6 billion) on Friday, less than its record-setting sum a day earlier but enough to calm panicky euro-zone credit markets.
"If central banks intervene it shows that there is a lot in disorder," Wolfgang Albrecht, strategist at German regional bank LBBW said.
"It shows that nervousness is justified and we don't think that this will be over in the next couple of weeks," he added.
Bear Stearns wrote in a note, "The fact that the ECB has had to come in with a second tender today, to follow yesterday's move, is bound to make the market think that this is a problem that will not go away quickly."
Worries over the troubled US subprime market intensified on Thursday, when French Bank BNP Paribas froze three funds that invested in US subprime mortgages.
BNP's subprime disclosure came less than 10 days after the bank, the second-biggest in the euro zone, said it would not be affected by the troubled US subprime market.
"It is difficult to say, what else is there to come," said one trader.
FINANCIAL STOCKS DOWN
Financial stocks were the biggest weight on European indexes. Deutsche Bank shares, for example, fell 3.5 per cent.
DWS, the Deutsche Bank mutual funds arm, said its ABS fund, which invests in asset-backed securities, currently has assets under management totalling 2.1 billion euros compared with 3 billion euros at the end of July. It said the fund remained open despite recent outflows.
Also in focus was ABN AMRO, which fell more than 10 per cent at one stage, partly on speculation that Fortis, the Belgian-Dutch member of the RBS-led consortium bidding for ABN, may find it difficult to finance its part of the deal.
Fortis dismissed the speculation, helping ABN shares to recover somewhat.
Among major decliners in Britain's FTSE 100 indexwas Man Group down 9.1 per cent after a source familiar with the plans said the world's largest-listed hedge fund group would delay the public offering of one of its hedge funds and on weakness in financial market.
Britain's FTSE tumbled 3.7 per cent and recorded its biggest fall in more than four years.
Germany's DAX index lost 1.5 per cent and France's CAC 40 fell 3.1 per cent.
Investors sold mining and oil stocks to cover losses elsewhere and amid concern the current credit squeeze could affect the overall economy, leading to slower economic growth, and hence less demand for oil and metals.
Heavyweight BP fell 2.8 per cent, Royal Dutch Shell slipped 3.3 per cent and Total fell 3.1 per cent. Miner Lonmin fell 7.1 per cent and Anglo American fell 5.8 per cent.
- REUTERS
