LONDON - European shares fell sharply On Tuesday, hitting a fresh two-year low on concern that major economies could fall back into recession and widespread scepticism over whether policymakers could stop the rot.
Stocks fell for the eighth consecutive trading day in high volume across the continent. Their drop followed steep losses in Asia, with Germany's DAX index down more than 6 percent at one point, before paring losses.
"It is just capitulation of market confidence and sentiment. There seems to be no stop to the selling, there is absolutely no confidence and no barrier to stem the flow of funds out of equities," said Angus Campbell, head of sales at Capital Spreads.
The FTSEurofirst 300 index of top European shares was down 1.84 percent at 919.08 points, extending a decline to a two-year low of 888.11. The index is down more than 24 percent from its 2011 high of mid-Febraury, a move that is now big enough to qualify as bear market for equity market insiders.
U.S. stock index futures were mixed, down 0.2 percent to up 0.2 percent in volatile trade, after a global stock rout that has racked up losses of 20 percent and wiped trillions of dollars of the value of shares since early May.
Investors were looking to a U.S. Federal Reserve policy meeting later in the day for action that could brake the slide.
"Today, everything hinges on Bernanke and the Federal Reserve. He is under huge pressure to do something, some form of quantitative easing, and it will probably have to be big for it have any impact," said Jeremy Batstone-Carr, strategist at Charles Stanley.
In Europe, shares linked to economic growth -- oils and financial -- were among the biggest losers.
The STOXX Europe 600 Oil & Gas Index was down 2.6 percent, having dropped more than 4 percent earlier. Brent crude was down nearly 2 percent on the demand outlook.
Royal Dutch Shell fell 5.9 percent, and has lost more than 20 percent this month, hit further by problems with its operations in Nigeria.
The STOXX Europe 600 Banking Index fell 2.2 percent. Barclays lost 7 percent after chief executive Bob Diamond renewed speculation over the bank's future in the UK if the British government pushes ahead with sweeping reforms of the industry.
Investors have cut their exposure to risky assets such as stocks after a rapid deterioration in the 18-month-old euro zone debt crisis -- which led the European Central Bank to step in this week to buy Italian and Spanish bonds to stop the crisis spreading -- a cut in the U.S. credit rating and worries over the economic outlook.
Stock weakness reflected "a combination of markdowns to the global economic outlook, along with the uncomfortable realisation that global policy makers may have their hands tied in terms of providing further support," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
Volumes were more than 70 percent of the index's 90-day average by mid-morning.
Across Europe, Britain's FTSE 100 and France's CAC40 fell 2.1 and 1.3 percent respectively, pulling back from earlier steeper falls.
Analysts said the decline would offer some buying opportunities, and the index was in positive territory in the early part of the session, going as high as 951.44, but the rally was short-lived.
"The markets' fall (in previous sessions) implies huge falls in corporate earnings, which is over-egging the pudding. On one level, you could say markets have become oversold, and valuations are very attractive," Batstone-Carr said.
On Monday, the S&P 500 suffered its biggest fall since December 2008, falling 6 percent, after the United States lost its triple-A credit rating.
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