* FTSEurofirst 300 ends 5 percent lower at 858.41 points
* Banks tumble as investors fear global recession
* Oil stocks track sliding crude prices
By Rebekah Curtis
LONDON, Oct 16 (Reuters) - European shares slid 5 percent on
Thursday, with banks taking a whipping as the world economy
faced recession in the worst financial crisis since the Great
Depression and oil stocks tracked tumbling crude prices.
The FTSEurofirst 300 <> index of top European shares
ended down 5 percent at 858.41 points, adding to a 6.5 percent
fall the day before.
European stocks have fallen more than 40 percent in the year
to date, hammered by a credit crisis that has sparked major
losses at banks, frozen interbank lending and slowed the
economy.
Banks were the day's heaviest losers, with Fortis <FOR.BR>
plunging more than 26 percent. HSBC <HSBA.L> shed 4 percent,
Santander <SAN.MC> ended down 6.5 percent and BNP Paribas
<BNPP.PA> lost 7 percent.
The VIX volatility index -- a gauge of stock market fear --
shot to record highs of more than 80 percent in late trade as
investors fled from risky equities.
U.S. stocks fell as signs of regional weakness in
manufacturing and poor corporate results fuelled fears of
recession. A day earlier, the S&P 500 index <.SPX> suffered its
worst tumble since the 1987 stock market crash.
RECESSION FEARS
The world's richest nations are now in or close to recession
and further interest rate cuts are needed to stem off more
fallout from the financial crisis, Reuters polls of economists
showed on Thursday.
"Recession is very much on the cards," said Mike Lenhoff,
chief strategist at Brewin Dolphin in London. "What the central
banks will have to do is bite the bullet and bring interest
rates down."
Across Europe, Britain's FTSE 100 <> lost 5.4 percent,
Germany's DAX <> shed 4.9 percent and France's CAC-40
<> ended 5.9 percent lower. Japan's Nikkei posted its worst
one-day losses since the stock market crash of 1987.
"This is almost the final leg before people capitulate. The
sooner we get to that the better," said Justin Urquhart Stewart,
director at Seven Investment Management.
Governments around the world have pledged $3.2 trillion in
emergency measures, including taking stakes in banks to help
them stabilize.
U.S. and European Union leaders agreed on Thursday to meet
at the weekend to prepare for a global summit to overhaul the
world's financial system.
French President Nicholas Sarkozy, currently representing
the EU on the world stage, said at an EU summit in Brussels he
would meet U.S. President George W. Bush on Saturday.
Central banks renewed efforts to free up liquidity and
unblock frozen lending, with further action from Switzerland,
Britain and the European Central Bank.
Switzerland's top two banks took emergency measures to shore
up their finances on Thursday, with the state taking a near 10
percent stake in UBS <UBSN.VX> while Credit Suisse <CSGN.VX>
raised new funds from private investors. UBS ended down 4.9
percent and Credit Suisse lost 0.9 percent.
RBS said financial sector rescue packages put together by
governments and central banks would serve as a shock absorber
but were unlikely to prevent most euro-area economies from
falling into recession next year.
In the energy sector, Royal Dutch Shell <RDSa.L> lost 7.2
percent and Total <TOTF.PA> ended down more than 9 percent as
crude slide to below $70 a barrel as European trading drew to a
close.
(Additional reporting by Brian Gorman; Editing by Quentin
Bryar)
