Fears over banks, economy pummel European stocks

By Sitaraman Shankar

LONDON, March 10 (Reuters) - European shares fell to their lowest close since mid-2006 on Monday as worries intensified that a credit crisis would lead to more losses at banks and cast a lengthening shadow over economies, hurting demand for metals.

The FTSEurofirst 300 index of top European shares ended 1.15 percent lower at 1,254.76 points.

Banks and mining stocks took the most points off the pan-European index, with UBS (UBSN.VX: Quote, Profile, Research) falling 4 percent, BNP Paribas (BNPP.PA: Quote, Profile, Research) 2.4 percent and Credit Suisse (CSGN.VX: Quote, Profile, Research) 3.2 percent.

The top three negative weights on the index were mining stocks Rio Tinto (RIO.L: Quote, Profile, Research), BHP Billiton (BLT.L: Quote, Profile, Research) and Anglo American (AAL.L: Quote, Profile, Research), which fell between 4 and 6 percent, driven by a fall in copper prices.

"People are concerned at signs that the financial system is not repairing itself, and that earnings outside the financial sector are now going to get hurt," said John Haynes, strategist at Rensburg Sheppard Investment Management.

"Logically hedge funds should be the next victim and people who deal with hedge funds, the prime brokers, those who supply capital."

"Interest rate cuts are not enough -- this is beginning to go beyond the Fed," he said.

The Federal Reserve is widely expected to cut interest rates by a further 75 basis points next week.