* FTSEurofirst 300 ends 5.4 percent lower
* Banks, commodities worst losers
* Spanish stocks fall on Argentina connection
By Sitaraman Shankar
LONDON, Oct 22 (Reuters) - European shares slumped 5.4
percent on Wednesday, led by bank and energy stocks as investors
added emerging markets ructions and waning commodity demand to
their list of worries.
The FTSEurofirst 300 <> index of top European shares
ended down 50.03 points at 873.90 points. The benchmark has lost
around 18 percent so far in October and is firmly on track for
its worst month on record.
Stocks have been battered this year by credit market
problems which led to a full-blown financial sector crisis, the
effects of which are spilling over into emerging markets.
On Wednesday, Hungary raised rates to defend its economy,
Ukraine sought IMF help and Argentina moved to nationalise the
country's private pension system.
Banks took most points off the index, with Santander
<SAN.MC> tumbling 9.9 percent on concerns over Latin American
economies after the Argentine move.
Other Spanish stocks also took a hit: oil group Repsol
<REP.MC> fell 15.8 percent, while Telefonica <TEF.MC> lost 8.8
percent. BBVA <BBVA.MC>, which runs one of the funds to be
nationalised, lost 9.1 percent.
"The crisis has moved up in scale, from companies to
countries, and this is a logical progression of the same theme,"
said Philippe Gijsels, strategist at Fortis in Brussels.
"Everybody is deleveraging and as the water level goes down,
the rocks are more apparent," he said. "The banks are being hit
by fears that countries could start to default and quite a lot
of bad loans will emerge."
Financials slumped with Royal Bank of Scotland <RBS.L> down
14 percent, ING <ING.AS> losing 11 percent after a Moody's
downgrade of some ratings and AXA <AXAF.PA> off 8.2 percent.
Across Europe, Britain's FTSE <> and Germany's DAX
<> lost 4.5 percent and France's CAC <> fell 5.1
percent. U.S. stocks <.SPX> <> <> were 1.6 to 2.8
percent lower.
COMMODITIES SLIDE
The DJ Stoxx European basic resources index <.SXPP> was the
worst performing sectoral benchmark in the region, sliding 9
percent as copper and aluminium prices sank to their lowest in
almost three years.
Miners Xstrata <XTA.L> and Vedanta <VED.L> tumbled more than
13 percent, while Kazakhmys <KAZ.L> lost 15.5 percent and
steelmaker ArcelorMittal <MTP.PA> fell 10 percent.
Energy stocks across Europe fell, with BP <BP.L>, Total
<TOTF.PA> and Shell <RDSa.AS> down 5.5 to 6.2 percent as oil
<CLc1> slid $4 to near $68 a barrel.
Among gainers, British Airways <BAY.L> rose 4.3 percent on
market talk of interest from Cathay Pacific <0293.HK>. BA
declined to comment.
Dutch telecoms group KPN <KPN.AS> rose 3.5 percent after it
announced core earnings above expectations and set a 1 billion
euro share buyback.
Slumping global equity markets have prompted policy
responses that included concerted interest rate cuts and massive
bank bailouts by governments.
Interbank borrowing costs mostly fell on Wednesday, with
further steep falls in dollar rates and spreads indicating that
the flood of liquidity pumped into the banking systems in recent
weeks is easing money market constraints.
But recession fears, and worries over emerging markets, held
centre stage.
"The old 'story' that has been put aside in the recent
period of financial market crisis now comes back to the market's
mind: recession fears," Commerzbank said in a note.
Fortis' Gijsels said he expected equity markets to bottom
next year or in 2010. "We may see a big bear market rally before
the end of the year but we will go down again," he said.
(Additional reporting by Sarah Marsh; Editing by David Holmes)
