Europe shares tumble 6 percent as banks and commods hammered

By Atul Prakash

LONDON (Reuters) - European shares slumped on Monday, pressured by banks and commodity stocks, as mounting concerns about a prolonged global slowdown and weaker demand for oil and metals hurt market sentiment.

The FTSEurofirst 300 index of top European shares closed 6 percent down at 810.04 points after rising 13 percent last week. The benchmark is down 46 percent so far this year after posting gains in each of the previous five years.

Banks were the worst hit, with Standard Chartered Bank falling 14 percent and UBS down 12 percent, Fortis slipping 11 percent and BNP Paribas declining 7.6 percent.

Commodities shares also slipped, tracking an 8 percent drop in crude prices, a 2.8 percent fall in aluminium prices and a 1.6 percent drop in copper prices, mainly on worries about global economic growth.

"The short-term outlook is going to be very difficult, given the weakening growth forecast, falling corporate profitability and the softening labour market," said Henk Potts, equity strategist at Barclays Stockbrokers.

"What the market would need to see is the practical implication of the measures that have been announced starting to work through the system and having a positive result."

A United Nations report said that world economic growth would slow to 1 percent in 2009 from 2.5 percent this year as the financial crisis bit, and the global economy might even contract if stimulus packages proved too little too late.

The financial crisis that began with a U.S. housing market collapse last year has already knocked several big economies into recession, including the euro zone. Most economists believe the United States and Britain will soon follow.