Volkswacht Bodensee - European bank shares slump as contagion fears reignite

Frankfurt's Deutsche Bank shares nosedived more than 13 percent on the lender's spiking cost of default cover, or credit default swaps, while peer Commerzbank tumbled by 10 percent.

In Paris, Societe Generale shed nearly eight percent and BNP Paribas lost around seven percent in value.

And in London, Barclays, NatWest and Standard Chartered tumbled about six percent.

Investor panic also sent oil prices sliding about three percent on weaker demand fears owing to a possible recession.

Share prices in energy majors including BP, Shell and TotalEnergies also tanked.

The haven dollar surged against the euro and pound.

- 'Contagion risk' -

"The selloff in banks has resumed, highlighting just how fragile sentiment is towards the sector," City Index analyst Fiona Cincotta told AFP.

"As central banks continued hiking rates this week the outlook is looking increasingly shaky.

"Deutsche Bank has come under the spotlight as a possible target for contagion risk," she added.

Indices in the key European capitals plummeted by more than two percent, after earlier losses across Asia.

Central banks pressed on this week with monetary tightening to bring down high inflation -- even though the troubles in the banking sector have been linked to their interest rate hikes.

The region's indices had wobbled Thursday as investors weighed rate hikes in Britain, Norway and Switzerland.

That came one day after the US Federal Reserve ramped up borrowing costs, and one week after a hefty increase from the European Central Bank.

Friday's fresh market woes overshadowed news of an upbeat survey showing eurozone economic growth hit a 10-month high in March.

- Shockwaves -

Global markets were slammed earlier this month by the collapse of three regional US lenders, notably Silicon Valley Bank.

Switzerland's enforced UBS buyout of embattled Credit Suisse last weekend sent further shockwaves across trading floors.

"Contagion fears are not yet going away," warned Finalto analyst Neil Wilson.

"It only stops once people stop asking who's next. And it does not seem like we are at that stage yet."

Some investors are however hopeful that central banks could be nearing the end of their interest rate-hiking cycle.

Pledges by global authorities to provide support to troubled lenders and depositors provided some stability.

The turmoil has also forced the Fed and others to change their monetary policy game plan to avoid further problems in the finance industry.

On Wednesday, the Fed announced a quarter-point rate hike -- half what was expected before the latest upheaval -- and indicated it could pause soon, while there is growing talk it could even begin cutting by year's end.

Observers said an expected tightening of credit in the finance sector -- caused by wary banks lending less -- would allow the Fed to step back.

But data indicating the US jobs market remained tight highlighted the need for the Fed to stick to its policy of battling prices.

There was a spot of bright news, with inflation slowing in Japan.

Japanese consumer prices rose 3.1 percent in February to slow from recent four-decade peaks, official data showed.

The Bank of Japan sees inflation as the result of temporary factors, including the Ukraine war, and sees no reason to raise interest rates.

- Key figures around 1040 GMT -

London - FTSE 100: DOWN 1.9 percent at 7,360.62 points

Frankfurt - DAX: DOWN 2.0 percent at 14,903.57

Paris - CAC 40: DOWN 2.0 percent at 6,996.08

EURO STOXX 50: DOWN 2.0 percent at 4,121.32

Tokyo - Nikkei 225: DOWN 0.1 percent at 27,385.25 (close)

Hong Kong - Hang Seng Index: DOWN 0.7 percent at 19,915.68 (close)

Shanghai - Composite: DOWN 0.6 percent at 3,265.65 (close)

New York - Dow: UP 0.2 percent at 32,105.25 (close)

Euro/dollar: DOWN at $1.0734 from $1.0840 on Thursday

Pound/dollar: DOWN at $1.2213 from $1.2286

Euro/pound: DOWN at 87.89 pence from 88.20 pence

Dollar/yen: DOWN at 129.86 yen from 130.86 yen

Brent North Sea crude: DOWN 3.2 percent at $73.46 per barrel

West Texas Intermediate: DOWN 3.6 percent at $67.47 per barrel

burs-rfj/bcp/imm

R.Adler--BTB