LONDON (MarketWatch) -- European shares followed Asian stocks deep into the red on Friday morning after a $14 billion bailout package for the U.S. auto industry fell apart in the Senate, with financials and oil firms taking the brunt of the fall. The pan-European Dow Jones Stoxx 600 index (ST:SXXP: news , chart , profile ) fell 3.8% to 195.97, wiping out all of the gains made this week, as HSBC Holding fell 4.4% and BP dropped 3.6%. Asian markets also fell sharply and U.S. stock futures were pointing to another day of losses on Wall Street as a dispute over union wages derailed a compromise between Republicans and Democrats who had worked feverishly to throw the U.S. auto sector a lifeline. Read more on autos. See Asia Markets. See Thursday's U.S. Market Snapshot. Automakers fell in Europe after the news, with Daimler down 6.1% and BMW (DE:519000: news , chart , profile ) down 4%. On a national level, the U.K. FTSE 100 index (UK:UKX: news , chart , profile ) fell 3.1% to 4,253.19, the German DAX 30 index (DX:1876534: news , chart , profile ) fell 4% to 4,577.65 and the French CAC-40 index (FR:1804546: news , chart , profile ) dropped 4.1% to 3,169.70. Banks were some of the worst performers after a downbeat update from U.K. lender HBOS, news that Bank of America will cut between 30,000 to 35,000 jobs over the next three years and that Bernard Madoff was arrested and charged with securities fraud. Read more on Madoff. Read more on Bank of America. HBOS (UK:HBOS: news , chart , profile ) shares dropped 11% after it said that it has seen an acceleration in the deterioration of credit quality in recent weeks, while pressure on net interest margins is rising due to the cuts to U.K. interest rates. The group estimated its impairment charge on corporate credit for the first 11 months of the year at 3.3 billion pounds ($5 billion), up from 1.7 billion pounds at the end of September. Impairments on unsecured retail lending were around 1 billion pounds, compared to 0.8 billion pounds at the end of September and the secured lending charge rose to 0.7 billion pounds from 0.4 billion pounds, with the figures likely to get worse. Estimated losses due to the market dislocation have also risen by around 400 million pounds to 2.2 billion pounds, the bank said. It made the statement ahead of a meeting to vote on its proposed takeover by Lloyds TSB. Lloyds TSB shares dropped 9.5%. Also, BBVA (ES:011321183: news , chart , profile ) shares fell 4.2% after it said that it will issue between 500 million euros and 1 billion euros in preferred stock. Oil futures fell $2.33 to $45.65 a barrel in electronic trading, giving back some of the previous session's sharp gains. Shares in TotaL fell 3.9% and ENI (IT:ENI: news , chart , profile ) shares dropped 5.5%. Elsewhere, shares in telecom equipment firm Alcatel-Lucent fell 6.6%. For full year 2009, Alcatel-Lucent expects the telecommunications equipment and related deployment services market to be down between 8% and 12% at constant exchange rates and is targeting adjusted operating profit of around break-even in 2009. It's aiming to reduce its break-even point by 1 billion euros a year in 2009 and 2010 and will reduce managers by approximately 1,000 and contractors by approximately 5,000.

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