At 1511 GMT (11.11pm Singapore time) the pan-European FTSEurofirst 300 index was down 5.5 per cent at 767.62 points.

French share prices on the CAC 40 index plunged 5.35 per cent to 2,922.71 points while the German DAX index of leading stocks fell by 5.06 per cent to 4,133.59 points in afternoon Frankfurt trading.

The slide echoed weakness in US and Asian equity markets.

'The mood among investors continues to be marked by an extreme risk aversion,' said Markus Reinwand, equity strategist at German bank Helaba.

European banks lost ground after Citigroup's shares tumbled 23 per cent to a 13-year low overnight as investors questioned the US bank's survival prospects.

On Thursday, however, Citigroup rose 6.3 per cent before the bell after CNBC reported that Saudi Prince Alwaleed plans to boost his stake back to 5 per cent.

In Europe, Credit Suisse fell 8.4 per cent, Dutch financial group ING lost 7.1 per cent, Germany's Deutsche Bank dropped 6.7 per cent and Spain's Banco Santander traded 6.6 per cent lower.

But Royal Bank of Scotland swam against the tide, rising almost 13 per cent ahead of a shareholder meeting to approve a fundraising plan. 'It's positive sentiment ahead of the vote and the market expects a good outcome,' a trader said.

Insurers also fell, tracking a 10-per cent-plus drop overnight for US peers on the Dow Jones sector index.

Britain's Aviva lost 12.9 per cent, French AXA lost 5.1 per cent and Swiss Life dropped 6.4 per cent.

All but two of the 38 industry groups in the FTSEurofirst 300 index were in the red, with analysts pointing to worries about a global economic downturn.

That was a key reason behind a surprise 100 basis point cut in the Swiss National Bank's interest rates, which took the target range for the 3-month Swiss franc LIBOR to 0.50-1.50 per cent.

Societe Generale, in a note on Germany, the euro zone's biggest economy and the world's number one exporter, said: 'The deepening of the banking crisis has made corporate funding conditions much tighter, considerably weakened international demand and intensified downward pressure on corporate margins.' Standard & Poor's Equity Research downgraded the industrial sector to 'underweight", saying: 'Cyclical stocks have suffered a further leg down and many companies are now likely to undergo significant declines in capacity utilisiation'.

Ahold shares shot up 7.5 per cent after the group reported a higher-than-expected 11 per cent rise in core quarterly profit and reiterated its full-year margin target.

Dresdner Kleinwort said the results 'confirm that an acceleration in sales is no longer coming at a cost to margins' and that it was 'encouraging to note that this is coming at a time when U.S. retailers are reporting an even more pressured U.S. consumer backdrop'.

Carmaker PSA Peugeot Citroen was down 4.2 per cent after unveiling plans to cut 2,700 jobs and saying that due to the financial crisis and the sector's turmoil, car sale volumes in main European markets would drop by at least 10 per cent in 2009 and 17 per cent in the fourth quarter.

Renault shares fell 6.4 per cent and Porsche lost 2.8 per cent.

Fears that recession will dent demand for oil saw the price of crude fall 2.5 per cent to US$52.30 (S$79.90) a barrel, hitting sector stocks such as OMV , down 4.5 per cent, ENI , down 2.5 per cent, Royal Dutch Shell , down 1.4 per cent and Petroplus , down 2.5 per cent. -- THOMSON REUTERS, AFP