By Anshuman Daga

LONDON, Dec 17 (Reuters) - European equities fell across the board on Monday and closed at their lowest in three weeks as inflation concerns whacked global markets and soured expectations of further rate cuts in the United States.

The pan-European FTSEurofirst 300 index <.FTEU3> lost 1.6 percent to 1,491.7, its weakest finish since Nov. 27 and trimming this year's gains to 0.6 percent.

Banks took pole position, with UBS <UBSN.VX>, HSBC <HSBA.L>, Santander <SAN.MC> and HBOS <HBOS.L> all down between 1.6 and 3.5 percent. Miners also fell on economic growth concerns.

Banks have been the worst performers this year in a sector littered with losses linked to a credit crunch.

"The intensity of this crisis will remain with us through a good part of 2008 and not until each and every bank and mortgage lender has cleared the decks and fully written down high risk assets can any form of confidence resume," Howard Wheeldon, senior strategist at broker BGC Partners said in a note.

The FTSEurofirst earlier fell as much as 1.8 percent. U.S. stock indexes were down between 0.4 and 0.8 percent. The European index is set for its worst yearly performance since 2002 when it tumbled more than 30 percent.

Data on Friday showed a jump in the U.S. consumer price index in November. The higher-than-expected figures came after a sharp rise in producer prices, highlighting worries voiced by the Fed when it cut rates modestly last week and disappointed some market players who had expected a bigger cut.

"Inflation will remain a concern over the next couple of months, but in light of a somewhat weak growth environment, inflation should ease, starting from the second quarter of next year," said Franz Wenzel, strategist at AXA Investment Managers.

"That should calm markets, but for the moment, investors are worried about that. The Christmas rally will be difficult to get this time."

WIDESPREAD LOSSES

Germany's DAX index <.GDAXI> and France's CAC 40 <.FCHI> both lost 1.6 percent and UK's FTSE 100 index <.FTSE> fell 1.9 percent. Asian equity markets also ended sharply lower.

Miners figured among European losers on economic growth worries. Rio Tinto <RIO.L> shed 3.2 percent, Xstrata <XTA.L> gave up 3.9 percent and BHP Billiton <BLT.L> fell 4.3 percent.

The DJ Stoxx European bank index <.SX7P> lost 2.2 percent, extending its losses so far this year to 17 percent, making it the worst performer along with the travel and leisure sector index <.SXTP> in the 18 groups in the DJ Stoxx 600 <.STOXX>.

Banking shares have fallen sharply over the past few months on worries that a debacle in the U.S. subprime mortgage market would hit revenue and profits and many banks have already reported huge writedowns.

On Monday, interbank lending rates for one-month euro, dollar and sterling funds extended recent falls in response to central banks measures announced last week to ease money market tensions.

However, the drop was again small, indicating that stressed money markets would take some time to return to normal.

Investors were also cautious ahead of quarterly results from three of Wall Street's biggest investment banks and brokerage firms, due later in the week, which are likely to give clues about the impact of the credit crisis on financial shares.

Among other losers, shares in telecom gearmaker Alcatel-Lucent <ALUA.PA> declined 5.2 percent as traders cited a downbeat note on the company by UBS. (Editing by David Cowell) (([email protected]; +44 20 7542 6437; Reuters Messaging: [email protected]))

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    For rolling updates on what is moving European shares  
    please click on [STXNEWS/EU] 
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 For pan-Europeanmarket data and news, click on codes in  
 brackets: 
 European Equities speed guide...................<EUR/EQUITY> 
 FTSEurofirst 300 index..............................<.FTEU3> 
 DJ STOXX index......................................<.STOXX> 
 Top 10 STOXX sectors...........................<.PGL.STOXXS> 
 Top 10 EUROSTOXX sectors......................<.PGL.STOXXES> 
 Top 10 Eurofirst 300 sectors...................<.PGL.FTEU3S> 
 Top 25 European pct gainers.......................<.PG.PEUR> 
 Top 25 European pct losers........................<.PL.PEUR> 
    Main stock markets: 
 Dow Jones...............<.DJI>  Wall Street report .....[.N] 
 Nikkei 225.............<.N225>  Tokyo report............[.T] 
 FTSE 100...............<.FTSE>  London report...........[.L] 
 Xetra DAX.............<.GDAXI>  Frankfurt market stories[.F] 
 CAC-40.................<.FCHI>  Paris market stories...[.PA] 
 World Indices......................................<0#.INDEX> 
 Reuters survey of world bourse outlook..........<EQUITYPOLL1> 
 Western European IPO diary...........................[WEU/IPO] 
 European Asset Allocation.........................[EUR/ASSET] 
    Reuters News at a Glance: Equities...............[TOP/EQE] 
    Main currency report:...............................[FRX/] 
  Keywords: MARKETS EUROPE STOCKS =2 LONDON