European shares fell for the fifth straight session yesterday to their lowest closing level in 10 weeks, as investors faced further signs that the pace of economic recovery will not be quick.
The FTSEurofirst 300 index of top European shares closed 1.1 per cent lower at 817.12 points. The fifth consecutive drop also marked the index's longest losing streak since mid-January.
Volumes on the FTSEurofirst 300 were about 80 per cent of its 90-day average daily volume.
Across Europe, Britain's FTSE 100 lost 1.1 per cent, Germany's DAX slipped 0.6 per cent and France's CAC 40 shed 1.3 per cent.
Financials were among the standout losers, with HSBC, Banco Santander, UBS, BNP Paribas, Aviva, KBC Groep, Legal & General and AXA off 1.9 per cent to 8.7 per cent.
Group of Eight leaders believe the world economy still faces "significant risks" and may need further help, according to summit draft documents, while the International Monetary Fund said the global economy was starting to pull out of recession but recovery would be sluggish and government policies need to remain supportive. The economies of the 16-nation eurozone, and that of the 28-nation European Union, declined at rates of 2.5 and 2.4 per cent respectively in the first quarter, it was confirmed by Eurostat, the EU statistics agency.
"People will be very focused on economic data, the shape of the recovery. A lot of people are betting on the V-shaped type of recovery, and if that isn't validated by data, then we can expect the market to come under pressure," said Ronan Carr, European equity strategist at Morgan Stanley.
"Equally, if we start to see an improvement in things like job market data, that will help the market go higher," he said, adding that investors would also be looking at corporate earnings for clue on market direction.
US aluminium major Alcoa is due to kick off the second-quarter corporate earnings season later in the day.
The pan-European index has rallied 38 per cent from a lifetime low hit on March 9, but the sharp bounce stalled last month and the benchmark is down 8.2 per cent since June 10. European auto makers, which had got a lift from the spring rally, have also came under pressure recently, down nearly 17 per cent since June 12.
Yesterday, Renault sank 7.5 per cent, Peugeot shed 5.1 per cent and Daimler gave up 2.3 per cent.
Oil producers fell as crude prices softened after US data showed a big rise in fuel stocks. BP, Royal Dutch Shell, Total, Repsol and StatoilHydro dropped 0.6 per cent to 1.7 per cent.
OPEC said world demand for its oil may take years to recover from this year's slump because of economic weakness and demand destruction.
Shares in basic resources fell along with metal prices. Xstrata, Anglo American, Vedanta Resources, Rio Tinto, Lonmin and ArcelorMittal lost between 1.3 and 4.9 per cent.
With mounting doubts over the prospect of a quick recovery, investors' focus is turning to sectors seen as more defensive, such as healthcare, telecoms and utilities.
Drugmakers were among the top gainers, with GlaxoSmithKline, Roche and Novartis rising 0.6 per cent to 1.5 per cent.
Mobile phone giant Vodafone advanced 0.7 per cent, while German utility E.ON put on 1.7 per cent.