* European shares fall by a record 7.8 pct
* FTSEurofirst 300 slips briefly slips below 1,000 points
* Banks, commodities worst losers
By Sitaraman Shankar
LONDON, Oct 6 (Reuters) - European shares suffered their
worst one-day percentage fall on record on Monday, sinking to
4-year closing lows as investors dumped stocks across the board
and Wall Street slid.
The pan-European FTSEurofirst 300 index <> fell 7.8
percent to close at 1,004.90 points, worse than a 6.3-percent
fall on Sept. 11, 2001, the day of the attacks on the World
Trade Center buildings in New York.
The index briefly slid below the 1,000 mark for the first
time since late 2004 and the Dow Jones industrial average <>
slipped below 10,000 points on Wall Street.
"It's just in free fall. The outlook is still very bearish
and we are nowhere near the bottom. There is no reason to buy
anything at the moment. The bid-offer spread is huge," said
Nicole Elliott, a technical analyst with Mizuho Securities.
Banks and commodity shares took most points off the index,
with Royal Bank of Scotland <RBS.L> -- which suffered a credit
rating cut from Standard & Poor's -- sliding 20 percent,
Barclays <BARC.L> losing 14.7 percent and UBS <UBSN.VX> falling
12.8 percent.
BP <BP.L>, Total <TOTF.PA> and Royal Dutch Shell <RDSa.L>
fell 7.7-8.9 percent as oil <CLc1> fell below $90 a barrel to an
eight-month low.
"People have decided that markets have no ability to repair
themselves and politicians have control of this process," said
John Haynes, strategist at Rensburg Sheppard Investment
Management.
"The buyers have stepped away, and the sellers are still
there."
More European governments offered bank deposit guarantees,
as regulators from Washington to Seoul scrambled to contain the
deepest financial crisis in 80 years.
Germany said it was considering a nationwide "umbrella" to
shield its banking sector from market turmoil, a reversal in
policy which underscored growing government concerns about
financial contagion.
Germany had pledged on Sunday to guarantee private deposit
accounts, as it clinched a deal to rescue Hypo Real Estate
<HRXG.DE>. That was followed by similar moves by Austria and
Denmark, after Ireland issued the first, albeit broader
guarantee last week.
But mortgage lender Hypo Real's shares lost 37 percent.
Just 14 stocks of the 312 on the FTSEurofirst index
advanced.
THE SMELL OF DESPERATION?
In one of the biggest cross-border rescues since the full
force of the credit crisis swept across the Atlantic into Europe
last month, BNP Paribas <BNPP.PA> scooped up Fortis's <FOR.BR>
assets in Belgium and Luxembourg to become the euro zone's
biggest deposit bank. BNP shares lost 5.4 percent; Fortis shares
was suspended.
"European governments are looking to stabilise the financial
sector by attempting to rescue some major institutions. Whilst
their actions are understandable, the smell of desperation
remains strong," said Chris Hossain, senior sales manager at ODL
Securities.
UniCredit <CRDI.MI>, Italy's second-biggest bank, also
announced plans to raise new capital. Its stock fell 5 percent.
The DJ Stoxx European bank index <.SX7P> slumped 8.9 percent
to 264.99 points, surpassing an 8.6 percent tumble in September
2001 to post its biggest fall since the start of 1992, according
to Thomson Reuters data.
Among other major movers, business software group SAP
<SAPG.DE> sank 16 percent after it said it had seen business
drop off abruptly.
Auto maker Volkswagen <VOWG.DE> jumped 5.2 percent to top
the sparse European gainers list as traders pointed to continued
speculation that Porsche <PSHG_p.DE> was exercising stock
options to raise its stake in the group.
Britain's FTSE <> ended 7.9 percent lower, Germany's
DAX <> lost 7.1 percent and France's CAC <> slumped 9
percent.
The euro hit a fresh 13-month low against the dollar <EUR=>,
while a slight fall in London interbank offered rates for
three-month dollars provided a faint glimmer of hope that money
market strains might be easing but conditions remained poor and
lending virtually non-existent.
Investors ignored a $700 billion package to rescue the U.S.
financial sector, passed by the U.S. House of Representatives on
its second try on Friday and signed into law by President George
Bush.
(Additional reporting Atul Prakash and Steve Slater; Editing
by Hans Peters)
