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London - Shares in European companies exposed to Russia fell sharply to lead a broad decline on Tuesday, as the rouble plunged in value and concern grew about the state of the Russian economy.
Shares in Raiffeisen Bank International, which relies on Russia for profits, hit a record low after Russia's aggressive hike in interest rates failed to convince investors the central bank had turned the tide on a developing financial crisis.
Shares in other companies exposed to Russia also dropped. The brewer Carlsberg slumped 5% to a 2½-year trough and German retailer Metro fell 3.5%.
The Russian economy has buckled and the rouble dropped because of Western sanctions and the falling price of oil, drawing comparison to the country's 1998 financial crisis, which saw the government eventually default on its debt.
"All markets will be governed by this (the ruble's slide)," said Justin Haque, a broker at Hobart Capital Markets. "It's 1998 again."
Oil and gas stocks resumed their slide as U.S. crude slumped to its lowest level since May 2009.
At 14:15, the eurozone Euro Stoxx 50 index index was down 1% at 2 953.70 points in volatile trade and hefty volume. The pan-European broader Stoxx Europe 600 was down 0.7% at 321.07 points.
The Stoxx Europe 600 has tumbled around 8.5% since December 5, wiping out market capitalisation of more than $740bn, roughly the size of Saudi Arabia's annual GDP.
Purchasing managers' survey for the eurozone released on Tuesday showed fragile growth in the currency bloc, while low oil prices are fuelling fears of deflation.
"This might be a good entry point but we need to see some stabilisation in Russia," said Joost van Leenders, investment specialist for allocation and strategy and BNP Paribas Investment Partners.
Bucking the trend, Orange and Deutsche Telekom rallied on news of talks with BT to sell EE.
Orange was up 1.3% and Deutsche Telekom rose 0.4% after the two firms entered exclusive talks with BT for a potential £12.5bn sale of EE.
BT shares were up 1.5%.
