Europe stocks fall 2.4% on credit, inflation fears

PARIS, Aug 19 (Reuters) - European shares dropped 2.4 percent on Tuesday in a broad equities selloff, ending at their lowest closing level in two weeks on renewed credit fears, a steep jump in core U.S. prices and weak U.S. housing data.

The FTSEurofirst 300 .FTEU3 index of top European shares unofficially closed 2.4 percent lower at 1,160.62 points.

Banks took a beating as investors fretted about the fate of the financial sector following a Barron's report that suggested the U.S. government may have no choice but to nationalise mortgage finance giants Freddie Mac (FRE.N) and Fannie Mae (FNM.N).

Royal Bank of Scotland (RBS.L) sank 6.7 percent, Fortis (FOR.BR) tumbled 4.8 percent and Commerzbank (CBKG.DE) shed 4.9 percent. The DJ Stoxx bank index .SX7P fell 4.4 percent.

Data showed on Tuesday that U.S. wholesale prices jumped in July at the fastest year-on-year rate since 1981, while home builders cut back on construction as they worked through a glut of unsold homes.

"Inflation will continue to be a concern, but the real worry is still in the housing market," said Franz Wenzel, strategist at AXA Investment Managers, in Paris.

"We will continue to have bleak data for a while. We know from the Japanese example that a housing slump usually lasts for longer than economists can think of."

(Reporting by Blaise Robinson)