European, US stocks hammered by finance sector woes

European and US stock markets endured another bruising session Monday with banking shares getting hammered especially hard on fears of a global economic slowdown.

Computer screens in both regions were blaring red as bourses in London, Paris and Frankfurt all finished down more than 2.5 percent, with the German DAX ending below 9,000 for the first time since October 2014.

Wall Street appeared headed for similar losses before a round of buying in the last hour or so enabled the market to avoid the worst.

In the end, the Dow Jones Industrial Average, down by more than 400 at one point, shed 177.92 (1.10 percent) to 16,027.05.

"There are concerns about overall global growth and appropriate valuation levels for equities across the board," said Michael James, managing director of equity trading at Wedbush Securities.

"The Fed has decided not to be the market's babysitter anymore, so investors are having to adjust a monetary-centric market to one that focuses on fundamentals like earnings and revenues," said Jack Ablin, chief investment officer at BMO Private Bank.

Based on that, there is still a need for a "sizeable" valuation adjustment, Ablin added.

US crude prices closed below $30 a barrel, amid worries that a floor for the market has not been reached. Shares of European oil giants BP and Total both lost 1.9 percent.

Lower oil prices also translated into drops for US midsized energy producers such as Apache and Marathon Oil. But a handful of larger US energy names finished higher following an afternoon rally, with Chevron jumping 3.8 percent.

Several prominent tech stocks stumbled. Facebook lost 4.2 percent, Amazon 2.8 percent and Tesla Motors 9.0 percent.

- Bank shares plunge -

Banking stocks sagged in both regions, with US titan Bank of America plunging 5.3 percent, Germany's Deutsche Bank 9.5 percent, France's Societe Generale 6.1 percent and Barclays 5.3 percent.

A slowing economy translates into higher loan defaults, weaker credit quality and lower interest rates, all of which are bad for bank profits, said Jim Sinegal, an analyst of banks and payment companies at Morningstar.

The slump also comes on the heels of a terrible round of European banking earnings.

Deutsche Bank reported a 2015 loss of 6.8 billion euros ($7.4 billion), its first annual loss since 2008, while Credit Suisse posted a net loss of nearly $3.0 billion.

Amid the bleak European economic outlook and persistently low interest rates, the banks are facing "death by thousand cuts" from tougher regulations and capital rules, said UniCredit chief economist Erik Nielsen

Low equity prices could compel banks to raise more capital and pare off assets, Nielsen said in a client note Sunday.

Adding to the worries is fear of a fresh dispute between the Greek government and its creditors in the European Union and the International Monetary Fund.

The general index on the Athens stock exchange closed down 7.9 percent to a 25-year-low while the banking index lost a stunning 24 percent.

- Key figures around 2200 GMT -

New York - Dow: DOWN 1.1 percent at 16,027.05 (close)

New York - S&P 500: DOWN 1.4 percent at 1,853.44 (close)

New York - Nasdaq: DOWN 1.7 percent at 4,283.75 (close)

London - FTSE 100: DOWN 2.7 percent at 5,689.36 points (close)

Frankfurt - DAX 30: DOWN 3.3 percent at 8,979.36 (close)

Paris - CAC 40: DOWN 3.2 percent at 4,066.31 (close)

EURO STOXX 50: DOWN 3.3 percent at 2,785.17 (close)

Tokyo - Nikkei 225: UP 1.1 percent at 17,004.30 (close)

Euro/dollar: UP at $1.1193 from $1.1158 on Friday

Dollar/yen: DOWN at 115.84 yen from 116.86 yen