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European shares fell on Tuesday, extending their recent sharp slide, as a hefty Russian interest rate hike hit stocks with exposure to the country and the relentless drop in oil prices knocked energy shares.
Shares in Austrian lender Raiffeisen Bank International, which relies heavily on Russia for profits, slid 5.3 per cent to a record low, after Russia's central bank raised its key interest rate to 17 per cent from 10.5 per cent in an emergency move that failed to immediately halt the collapse in the rouble.
Danish brewer Carlsberg and Finnish tyre maker Nokian, which both have a strong exposure to Russia, fell 4 per cent and 2.9 per cent, respectively.
"The fact that Russia's rate hike failed to stop the drop in the rouble is spooking investors and reviving systemic fears," said Alexandre Baradez, chief market analyst at IG France.
"Adding to that, the unstoppable fall in oil and the grim PMIs in Europe ... there's just no positive catalyst for the market in the short term, even though the situation on the medium term doesn't look that bad. Lower oil prices will boost economic growth and earnings at some point."
FTSEurofirst 300 index
At 0925 GMT, the FTSEurofirst 300 index of top European shares was down 0.3 per cent at 1,287.32 points, after losing as much as 1.1 per cent earlier in the session.
The broader STOXX 600 was also down 0.3 per cent. The index has tumbled around 8.2 per cent since December 5, representing a wipeout in market capitalisation of $740 billion, roughly the size of Saudi Arabia's annual GDP.
Purchasing managers' survey for the euro zone released on Tuesday showed fragile growth in the currency bloc, while low oil prices are fuelling fears of deflation in the bloc.
Brent fell over $1 per barrel on Tuesday to below $60 for the first time since July, hit by data showing Chinese factory activity slowed and as stumbling emerging market currencies dented demand expectations.
BP was down 0.9 per cent and Total was 0.4 per cent lower.
Repsol fell 2.4 per cent after the Spanish oil firm said it will launch a takeover bid for Canada's Talisman Energy worth $8.3 billion.
A sharp drop in oil prices since June has dragged down the valuations of oil producers and oil services companies and sparked the biggest consolidation wave in the sector since records began in the 1970s, according to Thomson Reuters data.
Bucking the trend, Orange and Deutsche Telekom rallied on news of talks with BT to sell EE.
Orange was up 2.8 per cent and Deutsche Telekom rose 1.4 percent after the two firms entered exclusive talks with BT for a potential 12.5 billion-pound ($19.6 billion) sale of EE.
BT shares were up 1.9 per cent.
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