European shares dived for a second consecutive session as fears of a sharp slowdown in global growth erased almost all of the week's early gains.

Those stocks with the greatest exposure to slowing global demand were the worst hit. Miners and oil producers lost heavily for a second day as metals and crude prices slid on commodity exchanges. Retailers, luxury brands and leisure and travel stocks took a hit as rising unemployment and slowing business activity were seen curtailing consumer spending.

"US economic data was negative and now everyone is worrying about recession, and it is going to be painful. We have a buyers' strike, whether you are talking about retailers or car sales or even utilities stocks," said Edmund Shing, equities strategist at BNP Paribas.

The FTSE Eurofirst 300 fell 5 per cent to 858.41. Germany's Xetra Dax lost 4.9 per cent to 4,622.81. France's CAC 40 fell 5.9 per cent to 3,181, while in Moscow the Micex index tumbled 9.1 per cent to 626.85.

"We have not seen this kind of volatility in living memory. We are seeing a high correlation between commodities, equities and property, and they are all getting hammered," Mr Shing added.

Huge redemptions from hedge funds, banks and retailer investors with equities holdings drove selling across the board, dealers said.

In Switzerland, the government took a 9 per cent stake in UBS, ploughing SFr6bn of capital into the ailing bank, while the country's central bank said it would buy toxic assets worth up to $60bn. Its shares ended down 4.9 per cent at SFr19.09

Credit Suisse said it would not need to accept government funds, and instead turned to a small group of large investors, which include the sovereign wealth fund Qatar Holding, to raise SFr10bn. The shares erased early gains to end 0.9 per cent lower at SFr45.50.

Elsewhere, financial stocks remained mired in losses. The Belgo-Dutch group Fortis plunged 26.5 per cent to €0.87 and Anglo Irish Bank fell 10.3 per cent to €2.02 while Bank of Ireland shed 8.4 per cent to €1.85. The Dutch financial services group ING fell 15.2 per cent to €10.11.

In Germany Deutsche Postbank dropped 8.4 per cent to €20.70 on talk that Deutsche Bank's deal to acquire a controlling stake in the country's biggest retail bank could fall through despite parent company Deutsche Post saying the sale was still on. Deutsche Post fell 14.1 per cent to €9.97. Deutsche Bank slid 6 per cent to €31.87.

The Finnish mobile phone group Nokia fell 4.2 per cent to €11.30 after undershooting expectations with its third-quarter results. The shares initially dropped by more than 8 per cent but investors were consoled by the company's outlook for the mobile phone market. Nokia said it expected industry volumes to rise 10.5 per cent to 1.26bn phones in 2008.

Miners and metals producers continued to fall on fears of slowing global demand. The French miner Eramet lost 6.7 per cent to €174.53, while the Paris-listed steelmaker ArcelorMittal shed 8.5 per cent to €20.09 and Germany's Salzgitter fell 11.10 per cent to €44.61.

Oil stocks were similarly weak after crude prices fell below $70 a barrel. France's Total shed 9.2 per cent to €33.20, Portugal's Galp Energia slid 8.5 per cent to €7.51 and Austria's OMV dived 17.6 per cent to €23.90.

As selling swept Europe, even defensive stocks retreated, with the German utilities E.on and RWE down 5.1 per cent to €26.02 and 3.7 per cent to €55.32, respectively. In France, GDF Suez slid 5.9 per cent to €26.59.