Nov. 17 (Bloomberg) -- European stocks fell, extending the worst retreat in equities in more than two decades, after Japan unexpectedly slid into a recession and Britain's biggest business lobby said the U.K. slump may be deeper than predicted.

Banco Santander SA, Spain's biggest bank, and the U.K.'s HBOS Plc and BNP Paribas SA of France slipped more than 6 percent. HeidelbergCement AG tumbled 22 percent on concern the cement maker's owner may have to sell shares to help prop up an investment company. Tesco Plc slid 6.6 percent after JPMorgan Chase & Co. recommended selling Britain's biggest retailer.

Europe's Dow Jones Stoxx 600 Index lost 2.6 percent to 200.37 in London, pushing this year's decline to 45 percent. Japan's economy shrank in the third quarter, entering the first recession since 2001, and the business group said the U.K. economy will contract the most in almost three decades next year.

``We are not seeing any kind of recovery at all in the world economy,'' said Gianluca Tarolli, a Geneva-based equity strategist at Lombard Odier Darier Hentsch & Cie., which has the equivalent of $134 billion under management. ``We are cautious and are underweight equities. We have a lot of concerns about growth overall in Europe.''

More than $30 trillion has been erased from the value of global equity markets this year as credit losses and writedowns totaled $966 billion in the worst financial crisis since the Great Depression. The Stoxx 600 is headed for its steepest annual drop since records began in 1987.

National benchmark indexes fell in all 18 markets in western Europe. The U.K.'s FTSE 100 slipped 2.7 percent. Germany's DAX sank 3.3 percent as did France's CAC 40.

`Longer' Recession

The U.K. economy will drop 1.7 percent in 2009, the most since 1980, the Confederation of British Industry said. The recession is ``likely to be deeper and longer lasting,'' according to CBI.

House prices in the U.K. are falling at the fastest pace since at least 2002, Rightmove Plc said today. The average asking price for a home fell 7.1 percent from a year earlier, the most since records began six years ago, according to the country's most-used property Web site.

The U.S. has entered a recession that will persist into next year, and economies around the world will follow suit, a poll taken by the National Association for Business Economics showed.

Santander, the Spanish bank that owns U.K. mortgage lender Abbey, lost 6.9 percent to 6.08 euros. HBOS, the U.K. bank that agreed to be bought by Lloyds TSB Group Plc, sank 14 percent to 74.5 pence. BNP Paribas, France's biggest bank, dropped 8.1 percent to 43.02 euros.

Citigroup Job Cuts

Citigroup Inc., the fourth-biggest U.S. bank by market value, said it plans to eliminate 50,000 jobs, or about 14 percent of the workforce, and reduce expenses by 20 percent from their peak as the global economy contracts.

Banks and brokerages worldwide have shed almost 160,000 jobs since the subprime mortgage market's collapse last year sparked a credit crisis.

The cost of borrowing dollars for three months in London increased for a third day as banks balked at lending on concern about the severity of the global recession.

HeidelbergCement, Germany's biggest cement maker, tumbled 22 percent to 39.90 euros on concern its billionaire owner Adolf Merckle may have to sell shares to help prop up one of his investment companies.

Tesco lost 6.6 percent to 308.7 pence. JPMorgan said discount grocer Aldi Group poses a ``major threat'' and cut its recommendation to ``underweight'' from ``neutral.''

Bodycote Plc sank 22 percent to 96 pence. The U.K. supplier of metal-strengthening services to Ford Motor Co. said it will halve a 260 million-pound ($383 million) payment to shareholders to pay off debt in light of financial market turmoil.

United Internet AG tumbled 12 percent to 5.26 euros after Credit Suisse Group AG cut Germany's third-largest Web-access provider to ``underperform'' from ``neutral,'' citing ``weaker- than-expected'' third-quarter results.

``We believe risk to 2009 conensus could be greater given a worsening European economy and ongoing DSL (digital subscriber line) competition,'' the bank added.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.

Last Updated: November 17, 2008 12:03 EST