Europe plunges on U.S. data

LONDON, England (CNN) -- European markets sank on Thursday as new data pointed to a faltering U.S. recovery and prompted concerns the world's biggest economy could be heading for a "double-dip" recession.

London's FTSE 100 dropped 4.7 percent to close at 4,045.3 and the CAC 40 blue chip index in Paris plunged 5.1 percent to 3,241.16, while Frankfurt's electronically traded Xetra Dax was down 3.4 percent to 3,573.68 in late trading (the German market was set to close at 1800 GMT).

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, fell 4.5 percent, with all of the major sub-indices ending in negative territory.

Investors on both sides of the Atlantic went on a selling binge after a survey by the Institute of Supply Management showed U.S. manufacturing activity slumped in July. (Full story)

The survey came a day after a report showed growth in the U.S. economy had slowed abruptly -- growing by just 1.1 percent in the second quarter of this year after 5 percent growth in the previous three months.

Signs of weakening economic performance fed fears that the U.S. could soon slip back into recession -- usually defined as two consecutive quarters of negative growth.

"Everything that has come out of the United States over the last weeks has been weak. There's no doubt that the double-dip argument is gaining momentum," Peter Ostler, head of research at futures brokers GNI, told Reuters.

The U.S. data came after a day of mixed profit results in Europe, which kept investors guessing about the health of corporate Europe.

"It's a familiar story. The market is trying to build a floor but the news flow on the corporate side isn't consistently good enough to build a rally," David Thwaites, European strategist at BNP Paribas, told Reuters.

Deutsche Bank (FDTE), Germany's biggest bank, lost 1.5 percent to 57.25 euros in late Frankfurt trading -- after surging higher in early trading -- as the company said pretax profit rose 35 percent after it sold assets and cut costs. (Full Story)

BNP Paribas (BNP), the eurozone's biggest bank by market value, also saw its early gains eroded. It closed down 2.4 percent to 45.76 after saying net profit slid 13 percent to 1.007 billion euros in the second-quarter, in line with its preliminary results released two weeks ago. (Full Story)

Barclays (BARC), Britain's fourth-biggest bank, dropped 8.6 percent to 447 pence after saying first-half profit fell as bad debts and costs rose. (Full Story).

France Telecom (PFTE), the country's dominant phone company, lost 2.9 percent to 14.27 euros after it said it had agreed to sell its Dutch cable network Casema for 750 million euros in cash to Liberty Media (L) of the U.S.

France Telecom has debts of about 60 billion euros and is desperate to sell businesses to restore investor confidence. (Full Story)

Shares in the owners of Royal Dutch/Shell, the world's third-largest oil company, declined after the group said it would cut 2,000 jobs as it posted a sharp drop in profit as the price of oil and gas tumbled and refining returns weakened. (Full story)

Shares in Shell Transport & Trading (SHEL), which represents 40 percent of Royal/Dutch Shell, fell 7 percent to 405.50 pence in London, while Royal Dutch -- which owns the remainder -- dropped 6.7 percent to 43.50 euros in Amsterdam.

And Allianz (FALZ), Germany's biggest insurer, slid 5.3 percent to 137.67 euros after saying late on Wednesday it would abandon its 2002 profit target because of losses at its banking operations. Its banking unit Dresdner Bank expects to axe about 3,000 jobs. (Full story)

The AEX index in Amsterdam lost 6 percent and Milan's MIB30 index was down 3 percent, while the SMI in Zurich fell 2.1 percent.

In the U.S. on Thursday, markets were sharply lower in early trading after a report showed manufacturing activity was slowing and oil producer Exxon Mobil reported worse-than-expected quarterly results. (Full story)

The Institute for Supply Management said its key gauge of manufacturing activity fell to 50.5 in July from 56.2 in June. Any reading over 50 indicates expansion, but economists expected a reading of 55.0. (Full story)

At mid-morning, the Dow Jones industrial average was down 162.47 points to 8,574.12, while the Nasdaq composite index had lost 22.66 points to 1,305.60. The Standard & Poor's 500 was down 17.85 points to 893.77.