LONDON - European stocks tanked on Monday as investors shrugged off global efforts to stem a fast-moving crisis emanating from the US banking sector.
Germany's finance watchdog insisted the collapse of Silicon Valley Bank (SVB) posed no threat to financial stability, and France's economy minister declared US bank failures had no contagion risk.
However, European equities tipped deep into the red as the morning progressed, with bank shares falling particularly hard in Italy and Switzerland.
Frankfurt and Paris stock markets dropped by about three percent, while Milan dived almost five percent at one stage and Zurich shed 1.7 percent.
London dipped 2.3 percent with losses capped after HSBC agreed to buy SVB's UK division for a nominal £1 ($1.2).
The dollar fell as the turmoil sparked uncertainty over the US Federal Reserve's plans to hike interest rates, while oil prices also slid.
- 'Weakest link' -
"Far from calming nerves, fear of contagion has ramped up further with investors dumping risk assets across Europe," City Index analyst Fiona Cincotta told AFP.
"Banks are leading the charge southwards with investors taking aim at Spanish and Italian banks, suggesting that these are considered the weakest links as fears rise."
Asian stocks diverged on US pledges to backstop troubled lenders after the collapse of SVB was followed by the failure of Signature Bank.
US authorities unveiled sweeping measures to ease concerns over the health of the banking system but it was insufficient to soothe market fears of an imploding banking sector.
Friday's collapse of SVB, which specialised in venture-capital financing largely in the tech sector, came after a huge run on deposits left it unable to stay afloat on its own.
That came in response to its announcement of a stock offering and sale of securities to raise much-needed cash. Its shares collapsed 60 percent in New York on Thursday and trading was suspended Friday morning, before regulators closed it down.
The crisis has sent shockwaves worldwide, with traders on red alert over any more bank failures.