European stock markets closed sharply lower yesterday, extending their losses after Wall Street shed more than 100 points, depressed by Latin America's deepening economic mayhem.

The main stock indices in Germany, France and Spain all ended more than three per cent down while London's FTSE 100 was affected almost as badly and closed 2.7 per cent off. In Dublin, the ISEQ index closed down 1.4 per cent, with the main leading stocks all losing ground, as the market succumbed to a bout of profit-taking.

By the time European trading closed, the Dow was down by 120 points or 1.3 per cent at 9,140 in the latest plunge since its record closing high of 9643.32 points on January 8th. It closed last night down 143.41 points at 9,120.67. Brazil, the world's eighth-largest economy, remains the focus of attention as it braces for a gruelling new test of its real currency, which has slumped to new lows as the country's dollar pool dries up.

Investors were worried by talk that Brazil's devaluation could ripple through other emerging markets and force devaluations elsewhere, especially in Argentina, as Brazilian exports become cheaper and more competitive in dollar terms.

Spain's close ties with Latin America ensured its markets suffered heavily, particularly its bank stocks.

Madrid's Ibex-35 index closed 3.11 per cent lower to 9,612.0 points off prior lows of 9,451.5 points as the real picked up after a quick rescue by Brazil's central bank.

In London the blue chip FTSE 100 closed sharply lower for a second day driven not only by Latin America and Asia worries but also by profit-taking in high-flying telecom and drug stocks.

The FTSE closed 161.1 points or 2.7 per cent lower at 5,861.2, extending Thursday's loss to leave the index 287.6 points below its record close set on January 6th.

In was a similar story in Frankfurt where Germany's blue-chip Xetra DAX was shaken when Siemens AG forecast its sales growth would slow this year and Volkswagen AG's chief said the German auto industry would have to rationalise to survive.

The electronically-traded Xetra DAX closed down 3.01 per cent, or 155.24 points, at 5,008.21. The March DAX index future contract closed 165 points lower at 5,024.

On the Paris bourse stocks tumbled to end 3.24 per cent lower as global qualms about emerging economies combined with monthly settlement day to find investors scrambling for the exits.