European shares fall again on US economic woes

European stocks ended lower yesterday, falling for the sixth time in seven sessions as weak US factory data added to recession fears, while a massive quarterly loss at Merrill Lynch fuelled worries over banks.

But dovish comments from the US Federal Reserve Chairman Ben Bernanke and a drop in US weekly jobless claims helped cushion the fall.

Energy and mining shares were among the top losers, dragged lower by economic worries and mixed commodity prices.

Both Anglo American and BHP Billiton ended down 4.1 per cent, while Total fell 1.9 per cent and Royal Dutch Shell shed two per cent.

Drugmaker Novartis sank 3.4 per cent after saying its quarterly profit plummeted 42 per cent, falling far short of forecasts.

The FTSEurofirst 300 index of top European shares closed 0.6 per cent lower at 1,374.36 points. Europe's benchmark index has already lost 8.8 per cent since the start of 2008, hit by fears that the US economy may tip into recession.

"We're at a time when the market is very focused on all the negative data and is really not paying attention to the bright spots," said Kate Warne, strategist at Edward Jones, in St Louis in the United States.

"We will continue to see worries about the health of the US economy, but it may not be in as bad a shape as some people think."

On the upside, Scottish & Newcastle jumped 5.4 per cent after rival brewers Carlsberg and partner Heineken raised their takeover bid for S&N to 800 pence per share from the previous 780 pence, while S&N, which previously refused to discuss the consortium's approach, entered talks with the two firms.

Carlsberg dropped 4.7 per cent and Heineken gained 1.8 per cent.

Banks retreated, with the DJ Stoxx European index losing 0.5 per cent, falling after US investment bank Merrill Lynch posted a quarterly loss of nearly $10 billion after mortgage-related write-downs and adjustments totalling about $16 billion, sending its shares down eight per cent by midday on Wall Street.

UBS lost 2.7 per cent, Societe Generale shed two per cent and Commerzbank fell 3.6 per cent.

"We're seeing mounting fears on how long the problems in the credit market will last and how bad it will get, and although some economic data such as today's factory data continue to show that the economy is weakening, there has been some better news on the jobs front," Mr Warne said.

Data showed factory activity in the US Mid-Atlantic region contracted dramatically in January, fuelling concerns over the prospect of a US economic downturn.

The weaker-than-expected numbers eclipsed earlier data that showed the number of workers filing initial claims for US unemployment benefits fell unexpectedly last week, figures that reassured investors over the health of the labour market.