Europe hits new 8-month lows

LONDON, England (CNN) -- European markets fell to new eight-month lows on Thursday after worse-than-expected U.S. retail numbers threw into question the strength of economic recovery.

The U.S. data showed consumers slowed their spending in May, with retail sales dropping 0.9 percent, more than the 0.3 percent decline most analysts had predicted. (Full story)

"May retail sales are a big disappointment and reinforce recent worries about the pace of the U.S. economic recovery," said Ken Wattret, chief European economist at BNP Paribas.

Markets also came under pressure after Lucent Technologies warned its fiscal third-quarter revenue would miss Wall Street expectations due to continuing weakness in the telecommunications market. (Full story)

London's FTSE 100 fell 1.6 percent to 4,771.9 and the CAC 40 blue chip index in Paris fell 1.2 percent to 3,957.33, while Frankfurt's electronically traded Xetra Dax was down 1.1 percent to 4,460.88 in late trading (the German market was set to close at 1900 GMT).

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, fell 1.3 percent to 1,090.99 -- its lowest level since October 2001. Life insurance, media, automobile, financial and telecom sub-indices were the biggest decliners.

After spending much of the session in positive territory, Nokia, the world's biggest mobile phone maker ended down 0.3 percent at 13.26 -- adding to the 5.9 percent loss on Wednesday. Swedish rival Ericsson, Europe's third-largest mobile phone maker, rose 3 percent to 17.30 crowns, taking back some of its losses from the previous session.

France Telecom (PFTE), the former state monopoly, fell 4.5 percent to 17.80 euros, while Europe's biggest telecom operator by sales Deutsche Telekom (FDTE) lost 0.2 percent to 10.28 euros in late Frankfurt trading.

BT Group (BT), Britain's largest fixed-line service provider, dipped 1.3 percent to 273.5 pence after saying its core retail division had accelerated sales growth plans as it attempts to revive its fortunes after years of falling market share. (more)

Most chipmakers, which supply mobile phone makers, also ended lower after making strong gains earlier in the session.

STMicroelectronics (PSTM), Europe's biggest, fell 2.6 percent to 23.50 euros and No. 3 Philips Electronics lost 2.4 percent to 28.31 euros, while Infineon Technologies (FIFX) was up 0.4 percent to 15.72 euros in late Frankfurt trading.

ARM Holdings (ARM), Europe's biggest chip designer, lost 1.5 percent to 163 pence, while computer services group Logica (LOG) fell 3.5 percent to 2219.58 pence after both were dropped from the FTSE 100 index of leading London shares in its quarterly reshuffle on Wednesday. The changes take effect on June 24. (more)

Financial stocks continued to come under pressure after the UK's Abbey National issued a profit warning earlier this week. Abbey (ANL) fell 4.2 percent to 858 pence, Lloyds TSB (LLOY) lost 2.5 percent to 652 pence, the Royal Bank of Scotland (RBOS) fell 2.8 percent to 1,876.93 pence, and HSBC Holdings (HSBA) declined 2 percent to 790.41 pence.

"Although I don't think that the problems Abbey is suffering will work their way into the other banks, banks will in general struggle to create growth and profitability over the next couple of years," James Hamilton, a banking analyst at WestLB Panmure, told Reuters.

In the insurance sector, France's No. 1 Axa (PCS) rose 1 percent to 19.09 euros after saying embedded value of assets was 20.11 euros per share in 2001. Traders said this figure was slightly above the range of numbers they had been expecting.

In Amsterdam the AEX index fell 1.1 percent, while Milan's MIB30 index lost 2.1 percent and the SMI in Zurich lost 1.5 percent.

In the U.S. on Thursday, a worse-than-expected retail sales report and a revenue warning from telecom gear maker Lucent Technologies pushed stocks lower in morning trading after rallying in the previous session. (Full story)

At midday, the Nasdaq composite was down 17.36 points, or 1.5 percent, to 1,501.76, while the Dow Jones industrial average was down 83.35 points, or 0.9 percent, to 9,534.36.