Europe’s stock markets fell, with losses accelerating after the crash of a Malaysian passenger plane in east Ukraine, which sharply raised tensions already fuelled by broadened US and EU sanctions.

Just as European markets were closing, news broke that MH17 had crashed in eastern Ukraine on its way from Amsterdam to Kuala Lumpur, and that it might have been shot down.

London’s benchmark FTSE 100 ended the day off by 0.68 per cent at 6,738.32 points, Frankfurt’s DAX 30 index shed 1.07 per cent to 9,753.88 and the Paris CAC 40 was off by 1.21 per cent at 4,316.12.

Milan’s stock index plunged by 2.22 per cent, and its peer in Madrid gave up 1.17 per cent.

The news also sent New York markets down

“The question now is to know what really happened to that plane, but it is clear that is what really sent the index lower,” said Renaud Murail at Barclays Bourse in Paris.

In New York, trading was in full swing as news of the plane crash developed, and in midday trading, the Dow Jones Industrial Average slid 0.42 per cent to 17,066.34 points, retreating from Wednesday’s record close.

The broad-based S&P 500 fell 0.66 per cent to 1,968.53, while the tech-rich Nasdaq Composite Index declined 0.38 per cent to 4,387.89.

European equities had leapt higher on Wednesday on the back of strong economic growth data from China.

“Risk aversion has returned to the markets on Thursday after the US and Europe announced a fresh round of sanctions against Russia in response to its part in the Ukrainian conflict,” said Alpari analyst Craig Erlam early in the day.

Russian stocks and the ruble also fell after the new sanctions were announced.

In Lisbon, shares in Banco Espirito Santo (BES) dropped again after two rating downgrades hammered the beleaguered banking group.

BES shares lost 7.91 per cent to 0.42 euros, while the PSI 20 index on which they are listed gave up 0.79 per cent overall.

Improved sentiment on government debt markets boosted Portuguese bonds however, with the rate on 10-year debt falling to 3.691 per cent from 3.726 per cent on Wednesday.

The rate for Spanish 10-year debt fell to 2.630 per cent from 2.663 per cent, and for Italy it declined to 2.788 per cent from 2.820 per cent.

Officials in Paris were cheered by a record low for 10-year French bonds, as the yield fell to 1.577 per cent from 1.615 on Wednesday.

For Germany’s benchmark Bund it stood at 1.149 per cent, close to the record low of 1.127 per cent set on June 29, 2012.

Meanwhile, in Turkey, the central bank resisted government pressure to slash its reference rate ahead of a presidential election in August, though it did trim its one-week repurchase rate to 8.25 per cent from 8.75 per cent.

In foreign exchange activity on Thursday, the European single currency was stable at $1.3525.

The British pound eased to $1.7103 from $1.7136 late on Wednesday in New York.

The euro rose to 79.08 pence from 78.92 pence.

The price of gold fell to $1,302.50 per ounce from $1,310 on Wednesday.