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(Updates with auto share moves)
By Danilo Masoni and Atul Prakash
MILAN, Jan 14 (Reuters) - European equities slumped to a 13-month low on Thursday, with the automobile sector leading the market lower after Renault shares tumbled following reports that fraud investigators searched its offices.
Shares in the French carmaker fell more than 20 percent after a union official said the firm's offices were searched last week regarding a fraud investigation possibly linked to emissions. Renault declined to comment.
The stock recorded its biggest drop since late 1994 and has seen some 5 billion euros wiped from its market capitalisation, according to Reuters data.
The report came after German carmaker Volkswagen last year admitted to using software to conceal the level of toxic emissions from some of its diesel vehicles in the United States. That has prompted investigations across several countries into Volkswagen, but also into other automobile manufacturers to ensure they have abided by regulations.
The European automobile and auto parts index fell 5 percent, putting further pressure on the broader stock market. Shares in other stocks also fell, with Fiat and Peugeot falling 10 percent and 8 percent respectively.
The pan-European FTSEurofirst 300 was down 2.8 percent, also under pressure following a Reuters report saying many European Central Bank policy makers are sceptical about the need for further near-term policy action.
"Expectations of more ECB help were growing. But news like this is a cold shower for such expectations in a climate already (made nervous) by the China situation, geopolitical tensions in Korea and this morning's attacks in Jakarta," said Marco Vailati, head of research at Italy's Cassa Lombarda.
Reporting by Danilo Masoni; editing by Jeremy Gaunt