There could be up to 50,000 new coronavirus cases per day in Britain by the middle of October if the pandemic continues at its current pace, the country's chief scientist adviser warned. On Sunday, health minister Matt Hancock said a second national lockdown was possible.

"We suspect equities would fall sharply and indiscriminately, similar to what happened in Feburary-March or in June ... if the rise in new cases in Europe seriously undermined the global economic recovery," said Simona Gambarini, markets economist at Capital Economics.

London's FTSE 100 was the worst-hit blue chip index in Europe, falling about 3.4% in its worst day in more than three months. UK-focused midcaps in the FTSE 250 dropped 4.0%.

The pan-European STOXX 600 was down 3.2%, a fall not matched since early June.

Europe's travel and leisure index fell 5.2%, its worst two-day drop since April, with airlines such as British Airway-owner IAG plummeting 12.1% and Lufthansa 9.5%.

European banks <.SX7P> slumped 5.7% to hover near record lows after lenders including HSBC and Standard Chartered were named in a cache of leaked documents which said they had transferred large sums of suspect funds over the past two decades.

HSBC's shares in Hong Kong and Standard Chartered's in London fell on Monday to their lowest since at least 1998. Barclays and Deutsche Bank, which were also mentioned in the report, slipped 5.4% and 8.8%, respectively.

On Wall Street, the banking sector fell 4.2% amid a broader market selloff. [.N]

Among other individual stocks, Britain's Rolls-Royce Holdings shed 10.8% after the aero-engine maker said it was looking to raise up to 2.5 billion pounds ($3.2 billion) in an effort to strengthen its balance sheet.

German telecom 1&1 Drillisch plunged 27.8% after warning that an increase in the cost of its network access deal with Telefonica Deutschland would hit profits this year. Its parent United Internet fell 26.1%.

In the latest string of M&A activity, Play Communications soared 36.7% after French telecoms group Iliad said it plans to acquire the Polish mobile phone operator in a 3.5 billion euro ($4.15 billion) deal. Iliad slipped 3.0%.

Lufthansa sank 9.5% as it further cut its fleet and workforce due to the coronavirus crisis.

By Sruthi Shankar and Julien Ponthus