Leading insurers, already weak in morning trade, fell further after news of the aircraft crash in New York triggered fears of a renewed terrorist strike in the US.

The FTSE Eurotop-300 insurance sector fell 4 per cent in late afternoon trade.

The reinsurers were hard hit with Munich Re down 3 per cent to €309, Hannover Re 5.1 per cent lower at €64 and Swiss Re 3.5 per cent down at SFr168.

There were also sharp losses in the wider sector, already rattled by cautious comments on the outlook from investment guru Warren Buffett overnight. ING lost 4.6 per cent to €29.10 and Axa was 6.2 per cent lower at €26.18.

Aegon dropped 4 per cent to €29.20, also hit by a ratings downgrade and price target reduction from Schroder Salomon Smith Barney.

Airline stocks, buoyed lately by interest rate cuts and industry capacity reductions, fell precipitously the moment news of the latest New York tragedy came through.

Lufthansa fell 6.7 per cent to €12.59 and Air France 5 per cent to €12.45. KLM gave up 6.5 per cent to €10.29. Alitalia, which triggered a cooling off suspension during the day, was 5.3 per cent lower at €1 in late trading.

The fresh wave of shocks for the airline sector plus another profits warning, its third this year, sent LVMH steeply lower and cast a cloud over the rest of the luxury goods sector.

LVMH announced a 5 per cent drop in October sales and revised its expectations for operating profits from little changed to falls of between 10 per cent and 15 per cent as a result of shrinking demand.

Amid broker downgrades and warnings revisions, the shares fell 3.1 per cent to €40.78. Christian Dior, which has a big stake in LVMH, lost 4.9 per cent at €29.44. Richemeont fell 4.9 per cent to SFr31.50.