(Reuters is replacing intra-day European and UK stock market reports with a Live Markets blog on Eikon (see cpurl://apps.cp./cms/?pageId=livemarkets). Adds details, updates prices)
* STOXX Europe 600 down 7.3 pct
* Brexit vote hits banks most, UK banks down up to 20 pct
* Milan, Madrid set for biggest ever one-day drop
* 650 bln euros wiped off European market cap
By Danilo Masoni and Atul Prakash
MILAN/LONDON, June 24 (Reuters) - European shares, led by the region's banks, felt the full force of Britain's vote to leave the European Union on Friday, falling as much as 9 percent as shockwaves spread across global markets.
Sterling hit a 31-year low in its biggest-ever fall while in Europe, the slide in stocks wiped off about 650 billion euros ($726 billion) from the market value of Europe's listed shares.
The pan-European STOXX Europe 600 index fell 7.3 percent by 1036 GMT after dropping as much as 9 percent, while the FTSEurofirst 300 slid 7.1 percent.
UK's blue-chip FTSE 100 fell 4.7 percent, with volumes hitting more than 100 percent of their 90-day daily average in just one hour of trading.
"The single-largest macro risk for Europe this year ... has crystallised," Goldman Sachs said in a note. "The decision lowers the growth outlook for the UK and Europe amid heightened policy uncertainty and threatens tighter financial conditions."
Britain's shock decision also reawakened concerns of ripple effects on the continent, with some investors pointing to Italy as the next risk to watch, while Spain was due to hold a general election on Sunday.
"While the referendum has left Britain in tatters, the European Union needs to make a quality leap fast to avoid the emergence of populism," said Andrea Cuturi, Chief Investment Officer at Anthilia Capital Partners in Milan.
"It's not a an accident that Milan and Madrid (stock exchanges) are faring worst. Spain has a general election just around the corner and in Italy the government has just lost local election and has a big banking problem to deal with."
An escalation of political risk in Europe could put pressure on government bond yields, putting pressure on banks in Italy and Spain, which are particularly exposed to sovereign debt.
Milan's FTSE MIB and Madrid's IBEX blue-chip equity indexes fell 10.4 and 11.4 percent, underperforming the wider slump and putting them on track for their sharpest one-day drop ever.
Europe's bank sector index fell 15 percent, making it the biggest sectoral faller so far, also weighed down by concerns over the fallout of the UK vote on a regional economy already struggling with low growth.
Spanish lender Santander, which has a meaningful UK exposure, fell 20 percent, while Italy's UniCredit and Intesa Sanpaolo both down by a similar amount.
UK banks Barclays, Royal Bank of Scotland and Lloyds plunged between 19 and 21 percent.
European insurers were down 10.3 percent, while auto shares fell 8.7 percent.
Gold producers Randgold Resources and Fresnillo rose 19 percent and 12 percent respectively on expectations that gold, seen as a safe-haven asset, will rise further.
Quitting the EU could cost Britain access to the EU's single market and mean it must seek new trade accords with countries around the world.
The United Kingdom itself could break apart, with leaders in Scotland - where nearly two-thirds of voters voted to stay in the EU - calling for a new vote on independence. ($1 = 0.8947 euros) (Editing by Toby Chopra)