Europe Shares Drop As Fears Mount Over Economy

European shares fell on Thursday, driven lower by concern in the investment community over the prospect of recession, which hit banks, energy and mining shares particularly hard.

The European Central Bank, which cut rates by half a point as expected, and the Bank of England, which shocked markets with the largest official rate cut since 1981, did little to support equities, where investors are now looking beyond the turmoil of the financial crisis to the damage to the economy.

The FTSEurofirst 300 index of top European shares fell 5.7 percent to an unofficial close of 898.78 points.

"With the stark warning as to just how bleak 2009 could prove to be ... it's perhaps no surprise that stocks are struggling to find any renewed support," said Jimmy Yates, a trader at CMC Markets, in a note.

Heavyweight stocks from a variety of sectors hit the index, including HSBC, which lost 6.4 percent, Vodafone, which dropped 8.4 percent, BP, which fell nearly 6 percent and EDF, which shed nearly 7 percent.

Among sectoral indices, the DJStoxx basic resources index was the worst performer, falling nearly 14 percent.