LONDON, June 26: European equities sank on Tuesday, with British defence company BAE Systems leading the fallers in London after it was hit by an anti-corruption probe in the United States, dealers said.

Investor sentiment was also dampened ahead of Thursday's interest rate decision from the US Federal Reserve, which was expected to hold American borrowing costs at 5.25 per cent.

In late morning deals on Tuesday, the FTSE 100 index of top shares fell 0.55 per cent to 6,552.20 points, in Paris the CAC 40 slid 0.93 per cent to 5,946.93 points and Frankfurt's DAX 30 erased 1.08 per cent to 7,845.06.

The DJ Euro Stoxx 50 index of leading eurozone shares slipped 0.90 per cent to 4,430.99 points.

The euro stood at 1.3453 dollars. Wall Street had lost ground in volatile trade Monday as renewed concerns about the spreading woes of the US mortgage sector extinguished an early rally.

In London, BAE Systems shares slumped 8.82 per cent to 403.25 pence, and earlier plumbed as low as 398.25 pence, after the group revealed it was at the centre of an anti-corruption probe by the US Department of Justice.

The group has previously been accused of setting up a 60-million-pound (89-million-euro, 120-million-dollar) slush fund for members of the Saudi royal family to secure business, and of making illegal payments to those involved in its deals. BAE strenuously denies the charges.

In Frankfurt, shares in Henkel fell 2.61 per cent to 38.76 euros after Deutsche Bank said it was placing 11.2 million preference shares in the German consumer products company with institutional investors.

In Paris, Arcelor Mittal shares sank 1.95 per cent to 47.37 euros after broker Merrill Lynch cut its recommendation on the shares to 'neutral' from 'buy.'

Across the Atlantic on Monday, the US Dow Jones Industrial Average erased earlier gains and fell 0.06 per cent to close at 13,352.05 points.

The tech-heavy Nasdaq slipped 0.46 per cent to 2,577.08 points and the broad-market Standard & Poor's 500 index lost 0.32 per cent to 1,497.74.Renewed concerns about failed subprime mortgages hitting major Wall Street banks had prompted some defensive posturing by investors.—AFP