European shares suffered their worst morning's trading of 2004 today, tumbling about three per centby midsession as a series of deadly blasts in Spain spooked investors already worried about the economic recovery.
At least 173 people were killed after simultaneous explosions tore through packed commuter trains in Madrid.
Officials blamed the pre-election blasts on Basque separatist group ETA but no claims of responsibility had been made and one Basque nationalist said he did not believe ETA was behind the attacks.
"There are conflicting rumours about who carried out the attacks," said one Frankfurt-based trader. "If it wasn't ETA, the whole thing takes on a different dimension - it's no longer a Spain-specific issue."
By 12:07 p.m., the FTSE Eurotop 300 index of pan-European blue chips was 2.5 per cent lower at 987.9 points, a one month low. Stocks to fall outnumbered those to rise by 100 to one and the per cent fall was the largest since February last year.
The narrower DJ Euro Stoxx 50 index fell 2.8 per cent to 2,841.2 points.
Germany's DAX led the retreat, shedding 4.1 per cent to touch its lowest point for 2004, while Spain's IBEX Index fell three per cent after the Madrid explosions.
Travel and tourism shares suffered, with Germany's TUI down 5.9 per cent and Ryanair down 6.3 per cent. British Airways, which warned it face higher costs this year, was off 8.9 per cent.
Tomorrow marks one year on since key European and US indexes touched six-year lows and while many strategists were not yet ready to call an end to the bull market that has followed, concerns were growing about some sectors.
"We think tech is especially risky because of valuations, and, increasingly, we fear that metals & mining -- or any other sector with a significant China premium - could come crashing down in the event of any bad news from China," Morgan Stanley strategists Mr Teun Draaisma and Mr Ben Funnell said in a note.
"We currently recommend overweight positions in consumer staples, energy, insurance, capital goods and materials, and underweight positions in IT, banks and most cyclicals (autos, hotels, media)."
US data including weekly jobless claims, retail sales and import and export prices will be closely eyed after data yesterday showed the US trade deficit ballooned to a record $43.1 billion in January.