* FTSEurofirst down 5.5 pct after hitting 5-year low
* Worries about financial sector and economy dominate
* Commodity shares track metal and crude prices lower
By Atul Prakash
LONDON, Oct 8 (Reuters) - European shares sank to five-year
lows on Wednesday as investor jitters about financial sector
ructions and their impact on the global economy grew despite a
bailout package for UK banks.
At 0940 GMT, the FTSEurofirst 300 <> index of top
European shares was down 5.5 percent at 948.42 points after
hitting a low of 923.86 -- the lowest level since late 2003. The
index has lost 12.9 percent this week and 37 percent this year.
Trading on France's CAC 40 <> was suspended for about
15 minutes in early trade as a number of stocks, representing
about 35 percent of the index's total market capitalisation,
were halted limit down, Euronext said.
Banks were the hardest hit, with Dexia <DEXI.BR> falling
14.6 percent, Societe Generale <SOGN.PA> slipping 7.7 percent
and Credit Agricole <CAGR.PA> shedding 6.2 percent.
"There is somehow a disbelief in the ability of the system
to repair itself. It may just be that the system has been so
incapacitated that what's called for is a different modus
operandi which is yet to be found," said Mike Lenhoff, chief
strategist at Brewin Dolphin.
"Certainly it's a very distressing situation we have got
into. It's wrong to say that the world is coming to an end --
that's a wrong bet to make -- but what you want to do is to be
fairly defensive in the treatment of your portfolios."
The worst financial crisis since the Great Depression forced
Britain to announce a multi-billion pound rescue package for
banks that included plans to inject up to 50 billion pounds of
government money into the country's biggest operators.
[]
The decision followed days of crippling pressure on banks,
some of which have lost nearly half their value on the stock
market amid investor fears they could collapse if they are not
handed a massive liquidity lifeline.
British bank HBOS <HBOS.L> surged 43.8 percent and Royal
Bank of Scotland <RBS.L> jumped 11 percent, but Barclays
<BARC.L> fell 8.5 percent and Lloyds <LLOY.L> fell 6.7 percent.
"The provision of extra liquidity will hope to free up
lending in the short to medium term. The hope is that this will
kick-start the banking sector once again, and breathe a much
needed air of confidence back into the system," said Chris
Hossain, senior sales manager at ODL Securities Ltd.
"The risk is that if this doesn't work, where do we go next?
A co-ordinated rate cut would logically seem to be the next
step, but after that, there isn't much more we can do."
GLOBAL CRISIS
The gloomy outlook continued to hurt global markets, with
Japan's Nikkei average <> tumbling 9.4 percent on Wednesday
and U.S. stocks sliding more than 5 percent overnight.
Hong Kong followed Australia's lead in slicing a full point
off interest rates as pressure grew for a coordinated, global
monetary policy response to the crisis.
Federal Reserve Chairman Ben Bernanke on Tuesday cautioned
that downside risks to economic growth had worsened and
signalled a readiness to lower interest rates.
Spanish Prime Minister Jose Luis Rodriguez Zapatero late on
Tuesday said Spain will raise its guarantee for deposits in its
banks to 100,000 euros and set up a 30 billion euro fund to buy
assets from banks and keep credit flowing to the economy.
[]
Energy stocks also fell on Wednesday, tracking a sharp drop
in crude prices that retreated below $88 a barrel as concerns
the global financial crisis will crimp oil demand overshadowed
signs that OPEC producers may consider a supply cut.
BP <BP.L>, Royal Dutch Shell <RDSa.L>, gas producer BG Group
<BG.L> and Tullow Oil <TLW.L> shed between 5.4 and 8.4 percent.
Mining stocks were also sharply lower. BHP Billiton <BLT.L>,
Anglo American <AAL.L>, Vedanta Resources <VED.L>, Lonmin
<LMI.L>, Kazakhmys <KAZ.L>, Xstrata <XTA.L>, Antofagasta
<ANTO.L> and Rio Tinto <RIO.L> fell between 4.9 and 11 percent.
(Additional reporting by Brian Gorman; Editing by Quentin
Bryar)
