European stocks slid in early trade on Tuesday, echoing sharp losses on Wall Street and in Asia as lingering fears over the stability of the financial sector rattled investors.
AXA, Europe's second biggest insurer, dropped 6 percent, dragged down by renewed concerns over the company's balance sheet and the prospect of a capital increase.
"We believe the solvency remains at low levels leaving little margin of error in case markets remain under pressure," UBS analysts wrote in a note, saying there is an 80 percent probability of a capital hike.
Other insurers were also hit, with Aegon down 9 percent and Allianz down 2 percent.
The DJ Stoxx insurance index, down 3.2 percent on the day, has now lost 32 percent since the start of the year.
Banking shares, down 29 percent year-to-date, were also on the downside, with Societe Generale losing 2.7 percent, Credit Suisse falling 6.4 percent and Deutsche Bank losing 2.6 percent. At 0937 GMT, the FTSEurofirst 300 index of top European shares was down 1.8 percent at 716.30 points, a level not seen in six years. The index, down for the ninth time in eleven sessions, has lost 14 percent so far this year.
"The banking sector is again at the centre of the negative newsflow. Full nationalisations are more and more conceivable," said Jacques Henry, analyst at Louis Capital Markets in Paris.
"If we don't get a rebound soon, stocks can fall to much lower levels."
On Monday, Wall Street sank to a 12-year low as news that the U.S. government was set to increase its stake in Citigroup failed to offset fears that a number of embattled U.S. banks could be nationalised.
COMMODITIES RETREAT
Commodity-related stocks also retreated, hit by a drop in metal and oil prices on mounting economic worries. Xstrata was down 4.3 percent, Total down 1 percent and Repsol down 1.5 percent.
Shares of automakers lost ground. BMW, downgraded by Morgan Stanley to "underweight" from "overweight", dropped 6.3 percent and Daimler, downgraded to "market perform" from "outperform" by Bernstein, was down 5.4 percent.
Around Europe, UK's FTSE 100 index shed 0.5 percent, Germany's DAX index fell 1.7 percent, and France's CAC 40 lost 1.4 percent.
Adding to the grim picture, the Munich-based Ifo economic research institute said German corporate sentiment deteriorated slightly in February, as a worsening in firms' assessment of current business conditions outweighed a rise in expectations.
The Ifo's business climate index, based on a monthly poll of around 7,000 firms, fell to 82.6 in February from 83.0 in January. A Reuters poll of 49 economists had pointed to a flat reading.
Investors' attention will turn to U.S. consumer confidence data, expected at 1500 GMT, as the market looks for clues on the extent of the damage from the recession on consumers' morale. U.S. home price data, due at 1500 GMT, will alo be in focus.
