European shares were slammed on Friday, with sharp losses from banks and insurance companies helping to pull the Stoxx 600 back to 2003 levels.
The pan-European Dow Jones Stoxx 600 index dropped 2.1% to 179.14, a level not seen since the first half of 2003.
Allianz ) shares fell 8.6% and AXA shares dropped 9.2% in the insurance sector.
Banks trading lower included BNP Paribas down 8.6%, and Societe Generale , down 6.6%.
Barclays shares fell 13.2%.
The lender's CEO, John Varley, said that the bank will make a profit in 2008 even after taking all necessary write-downs, the Independent newspaper reported Friday. He also said that Barclays intended to pay in cash, rather than shares, if it participated in a government plan to insure banks' assets against further losses, the paper reported.
Banks fell sharply in the first trading sessions of the week as investors fretted that poor trading conditions will lead to further asset write-downs.
"It's an endless story," noted Heino Ruland, strategist at consultancy FrankfurtFinanz, speaking about the banking-sector write-downs. "There are certainly more than one or two insurance companies which do have off-balance sheet risks," he noted.
On a national level, the French CAC-40 index fell 2.4% to 2,801.58 and the German DAX 30 index dropped 2.4% to 4,116.40.
The U.K. FTSE 100 index dropped below 4,000 for the first time since December after GDP figures showed the country is in a recession. The index was down 1.6% at 3,990.58. See London Markets.
U.S stock futures were pointing to another day of losses on Friday, with Dow Jones Industrial Average futures down 191.
Oil producers also fell in Europe, with BP shares down 2.3%. Crude-oil futures declined, with the front-month contract down 83 cents at $42.86 a barrel.
Drug makers in focus
Several pharmaceutical stocks were higher. The Wall Street Journal reported that Pfizer is in talks to buy Wyeth in a deal that could be worth more than $60 billion. See full story.
Shares of Merck KGaA climbed 5.7% after its Merck Serono unit said that a phase III trial of Cladribine for patients with relapsing-remitting multiple sclerosis met its two-year primary endpoint.
Shares of Roche Holdings rose 0.5%. It said Friday that the European Union's Committee on Human Medicinal Products has issued a positive recommendation for the use of MabThera with any chemotherapy combination as a first-line treatment for chronic lymphocytic leukaemia.
UCB shares jumped 5.2% after GlaxoSmithKline signed a deal to acquire UCB's current marketed product portfolio across certain territories in Africa, the Middle East, Asia Pacific and Latin America for 515 million euros in cash. GlaxoSmithKline shares edged down 0.3%.
Shares in Infineon Technologies fell 6.3% in Frankfurt after its Qimonda ) unit filed for insolvency in a Munich court.
The company said the decision was due to the "massive drop in prices in the DRAM industry" as well as dramatically reduced access to financing on the capital markets. A previously agreed 325 million-euro ($421 million) financing package involving the German state of Saxony, several banks and Infineon Technologies could not be completed in time, the company said.
Aer Lingus shares dropped 16.4% in London.
Ryanair Holdings late Thursday abandoned its latest takeover attempt on Aer Lingus Group, after the Irish Government rejected its 748 million-euro offer. Ryanair shares rose 1.7%.
