European stocks dived by more than 7 percent midday on Friday, swept up in a global panic sell-off as investors feared governments' efforts to thaw credit markets would fail to ward off a global recession.
Fragile banks and insurers were among the biggest fallers, as discouraging news in the insurance sector worried investors of significantly lowered earnings.
Miners, meanwhile, led the drop as the European basic resource sector slumped 9.5 percent.
"The market is catching up with the grim reality that this isn't going to be a mild downturn," said James Hamilton, bank analyst at Numis.
At 1122 GMT, the pan-European FTSEurofirst 300 index was down 7.24 percent at 854.64 points, after falling more than 9 percent in early trade and hitting its lowest level since July 2003.
The index has fallen more than 21 percent so far this week and is on track for its worst week on record, in a credit crisis that has frozen interbank lending, hammered banks and slowed the global economy.
Insurers followed banks as some of the worst underperformers, under pressure after the second largest U.S. insurer, Prudential Financial, warned on quarterly profits on Thursday, sending its shares down by more than 23 percent.
This was followed by news on Friday that Japan's Yamato Life Insurance Co, an unlisted midsized insurer, became the first Japanese financial institution to collapse due to global market turmoil stemming from the subprime crisis.
"The two events were a one-two punch on the insurance sector and this was compounded by price target downgrades from several brokerages," said a Frankfurt-based trader.
Allianz was 12.6 percent lower, leading the sector lower, while Axa was down 12 percent and the world's second-largest reinsurer Munich Re shed 11.6 percent.
General Electric, a bellwether for the U.S. economy, posted a profit drop in line with its recently cut forecast.
DEFENSIVE STOCKS SLIDE
Oil shares tumbled, with BP and Royal Dutch Shell down 5.7 and 7 percent respectively as crude fell 4.5 percent.
Lower crude prices also hurt utilities, with RWE down 10 percent, E.ON off 11 percent and EDF nearly 6 percent lower.
"Easing oil prices mean that utilities can't turn to more expensive alterative energy methods to add to their mixture — this is particularly hard on companies like E.ON," said an analyst.
GDF Suez shares dropped 5 percent, extending Thursday's 13 percent fall after Belgian energy minister Paul Magnette told Le Soir newspaper of plans to cap electricity prices at subsidiary Electrabel.
Pharmaceutical stocks, usually seen as defensive, were not spared — AstraZeneca was down 5 percent, GlaxoSmithKline off 6 percent and Novartis down 6.7 percent.
Heavyweight telecoms stock Vodafone dropped 7 percent.
Miners took a whipping as copper plunged 9 percent, with Rio Tinto slumping 12 percent, BHP Billiton down nearly 10 percent and Anglo American losing 8.2 percent.
G7 MEETING EYED
Finance chiefs from the Group of Seven rich nations meet in Washington later on Friday to discuss how to stem the crisis.
"Markets will remain under severe pressure until we see further decisive and coordinated actions from global authorities. In that sense, this weekend's meeting of the G7 finance ministers could be of truly monumental importance," said Paul Niven, head of asset allocation at F&C Asset Management.
"It is likely that we are a short period of time from seeing much of the required, coordinated steps from authorities which are needed to tackle the crisis. It is clear that the interdependence of economies and markets is such that unilateral responses, which we have mainly seen to date, are simply not sufficient."
Britain's FTSE 100 lost 7 percent, France's CAC lost 8.1 percent and Germany's DAX shed 9.2 percent.
The major national indexes fell as much as 10 percent earlier.
