(MENAFN- AFP) European stock markets dived Thursday on the back of weak industrial output data and a growing crisis at Portugal's largest lender, Banco Espirito Santo.
Sentiment was also weighed down as Chinese exports fell short of expectations.
In early afternoon deals, London's FTSE 100 dropped 0.85 percent to 6,660.88 points, after the Bank of England held interest rates as expected at a record-low 0.50 percent.
Frankfurt's DAX 30 slid 1.52 percent to 9,658.87 points, the Paris CAC 40 slid 1.54 percent to 4,292.93, and Milan's FTSE Mib was down 2.14 percent at 20,442.71 points.
Across in Portugal, Lisbon's PSI 20 benchmark tumbled 4.34 percent to 6,092.66 points, while Madrid's Ibex 35 index fell 2.48 percent to 10,482.20.
France and Italy became the latest of Europe's biggest economies to post poor output data, with Italian production falling the most since November 2012, official data showed Thursday.
Germany and Britain have already issued disappointing figures for May, raising fears that Europe's economic recovery may be stalling.
"What really hurts shares today... are worries that the economic recovery in the eurozone might be already weakening again," broker Markus Huber at Peregrine & Falcon told AFP.
"Latest economic data out of Germany and also today from France and Italy are clearly seeming certainly to point this way."
US stocks opened sharply lower, dragged down by the weakness in Europe.
Five minutes into trade, the Dow Jones Industrial Average tumbled 0.89 percent to 16,834.70.
The broad-based S&P 500 slumped 0.93 percent to 1,954.58, while the tech-rich Nasdaq Composite Index slid 1.42 percent to 4,356.36.
- Bank sector slides -
Portugal was rocked by a crisis surrounding Banco Espirito Santo (BES), the biggest Portuguese bank by market capitalisation, sending the nation's bond yields higher as investors feared fallout from the scandal.
Portugal's market regulator halted trading in BES shares after they plunged over allegations that its parent company covered up a 1.3 billion euro ($1.8 billion) hole in the accounts.
"It is mainly concerns about the health of Banco Espirito Santo that has dented market sentiment, with bank shares losing ground across the board," said Forex.com analyst Fawad Razaqzada.
"With BES being the largest Portuguese bank, the market is refusing to ignore its potential impact on Portugal and other peripheries," a reference to countries like Greece, Italy and Spain.
Financial news agency Bloomberg quoted BES as announcing delays in payments of short term debt by its parent holding company.
In reaction to Thursday's newsflow, BES shares collapsed by 11.54 percent to just 0.54 euros.
- Pound eases -
London investors meanwhile essentially ignored the BoE's latest decision to maintain rates at 0.50 percent, where they have stood since March 2009.
Britain's central bank also opted to maintain the level of cash stimulus in the economy at £375 billion ($641 billion, 471 billion euros). Both decisions were in line with market expectations.
In foreign exchange activity, the British pound eased to $1.7114 from $1.7159 the day before.
The pound had jumped last Friday to a six-year high of $1.7180 in expectations that London could raise rates in the coming months.
The European single currency eased to $1.3613 from $1.3642 late on Wednesday in New York. The euro also rose to 79.54 pence from 79.50 pence.
In commodity deals on Thursday, haven investment gold soared to a near four-month high at $1,344.90 per ounce - a level last seen on March 17 - before easing slightly to $1,343.25.
Asian stocks were mainly higher Thursday after Wall Street advanced a day earlier in response to an upbeat outlook for the US economy by the Federal Reserve.
Sydney added 0.22 percent despite soft jobs figures, while Seoul added 0.12 percent, Hong Kong put on 0.27 percent and Shanghai was flat.
Tokyo dipped 0.56 percent as the strong yen weighed on exporters.
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