LONDON (MarketWatch) -- European shares followed Asian stocks deep into the red on Friday, 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 4% to 195.63, wiping out all of the gains made this week, as HSBC Holdings Fdropped 3.9%.
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 ell 6.2% and BP down 7.2% and BMW (DE:519000: news , chart , profile ) down 4.7%.
"We are in a very poor macro trend for the consumer, for unemployment. This is only going to potentially make things worse," said Edmund Shing, strategist at BNP Paribas, speaking about the collapse of the bailout package.
"None of it helps. We're also seeing a reversal of a rally seen in the last few days. People still have the tendency to take profits at any opportunity," he added.
On a national level, the U.K. FTSE 100 index (UK:UKX: news , chart , profile ) fell 3.2% to 4,248.08, the German DAX 30 index (DX:1876534: news , chart , profile ) fell 3.9% to 4,579.96 and the French CAC-40 index (FR:1804546: news , chart , profile ) dropped 4.8% to 3,149.03 amid a sharp fall for Alcatel-Lucent shares.
Banks slammed
Banks were some of the worst performers with investors eyeing a gloomy update from U.K. lender HBOS, news that Bank of America will cut between 30,000 to 35,000 jobs, downbeat comments from J.P. Morgan's CEO and that Bernard Madoff was arrested and charged with securities fraud. Read more on Madoff. Read more on Bank of America. Read more on J.P. Morgan CEO comments.
"The drop in financials today is partly connected [to the auto sector news] but it's also connected to the fact that HBOS had a big profit warning today," noted Shing.
HBOS (UK:HBOS: news , chart , profile ) shares slumped 16% in London. See related London Markets.
The lender said Friday that its bad debt charge has soared over 70% to around 5 billion pounds ($7.5 billion) in the last couple of months as credit quality has deteriorated sharply and asset prices have fallen further.
The bank, which is planning to raise 11.5 billion pounds, mostly from the government, and is being bought by Lloyds
