LONDON, Jan 29: Europe’s main stock markets fall sharply on Thursday, pulled down by the banking sector which ended a brief rally on profit-taking, traders said.

Europe’s equities also slid despite gains across Asia in the wake of US lawmakers’ approval of a multi-billion-dollar stimulus package, as a widely-watched survey said European consumer and business confidence sank to a record low in January.

Meanwhile in France, thousands of workers protested against President Nicolas Sarkozy’s handling of the economic crisis, disrupting public transport and services.

In late morning deals, London’s FTSE 100 index of leading shares fell 1.67 per cent to 4,223.12 points. Frankfurt’s DAX 30 dropped 0.95 per cent to 4,475.64 points and in Paris the CAC 40 lost 1.0 per cent to 3,045.29 nearing the half-way mark. The DJ Euro Stoxx 50 index of leading eurozone shares declined 0.94 per cent to 2,301.03 points.

Profit taking is coming out,” said Capital Spreads analyst Simon Denham.

Clients are looking for a pull back in the market.The European single currency stood at $1.3252 .

Banking stocks meanwhile tumbled across Europe after shooting higher in recent days on hopes of a quicker-than-expected recovery for the global economy left shattered by the credit crunch.

In London, Lloyds Banking Group slid 11 per cent to 89.80 pence and Barclays lost 7.38 per cent to 99.20 pence. Deutsche Bank dropped 3.57 per cent to 21.36 euros in Frankfurt and French peer BNP Paribas gave up 4.10 per cent to 28.91 euros in Paris.

Markets were also weighed down by the heavyweight mining sector. Xstrata slumped 9.31 per cent to 565 pence after the Anglo-Swiss giant said on Thursday it planned to raise 4.1 billion pounds (5.9 billion dollars, 4.4 billion euros) to pay down high debt levels posing potential problems for the group.

It said high debt levels were no longer appropriate given the financial crisis and the resulting slump in demand for raw materials as the world economy tumbles into recession.

Earlier in Asian trade, Tokyo’s stock market closed up 1.79 per cent as investors hoped for bold action by US President Barack Obama to nurse the economy back to health after the House of Representatives approved a giant stimulus package.

Unlike in Europe, Japanse bank shares were buoyed following the approval by one half of Congress of an 819-billion-dollar stimulus plan that Obama says is crucial to create millions of jobs and spur demand.

It will now move to the Senate for approval but investors expect a swift passage as Democrats control both houses.

Also boosting sentiment was speculation that Obama will push ahead with an idea of creating a government-backed entity that would unload toxic assets from banks’ balance sheets.

US stocks had rallied Wednesday ahead of the stimulus vote.---AFP