European shares down 3.4 percent

European shares closed 3.4 percent lower on Friday, hammered by mounting concerns that tough eurozone austerity measures would slow growth in the region. The pan-European FTSEurofirst 300 index of top shares closed down 3.4 percent at 1,014.25 points, having earlier dropped to as low as 1,010.85. Banks took a beating, with the STOXX Europe 600 banking index down 5.2 percent. Spanish banks Banco Santander and BBVA fell 8.9 and 7.6 percent respectively.
But despite Friday's late sell-off, the index recorded a weekly gain of about 4.8 percent after Monday's sharp rally triggered by the $1 trillion emergency rescue package to stabilise the eurozone. "We are seeing a lot of red. There are concerns about how durable the eurozone plans will be," said Peter Dixon, economist at Commerzbank. "Ahead of the weekend investors do not want to get caught out." French banks Credit Agricole and Societe Generale, which are significantly exposed to Southern Europe, lost 6.4 percent and 8.6 percent respectively.
The euro was also hit hard, dropping to a fresh 18-month low against the US dollar. According to Thomson Reuters data, around 160 billion euros ($197 billion) was wiped off the UK's FTSE 100, Germany's DAX, France's CAC, Spain's IBEX and Italy's MIB indexes combined on Friday, roughly the size of Czech Republic's GDP in 2009. Over the past few months, European stocks have been hammered by escalating fears over the risk of Greek debt problems spreading to other countries in the region. European shares have strongly underperformed US peers.
So far this year, Greece's ATG index has plummeted 24.5 percent, Spain's IBEX is down 22 percent, Portugal's PSI 20 down 17.2 percent, Italy's MIB down 15 percent and France's CAC 40 down 10 percent. Wall Street's S&P 500 is up 1.5 percent year-to-date. Greece, Portugal, Ireland and Spain together account for about 18 percent of eurozone gross domestic product (GDP).
"In the coming months, the market will be hesitating between sovereign debt fears and economic growth fears for the eurozone," said Claire Chaves d'Oliveira, head of equity management at Groupama AM, in Paris. Across Europe, the FTSE 100 index was down 3.1 percent, Germany's DAX fell 3.1 percent and France's CAC 40 was 4.6 percent lower.