European shares closed one per cent lower yesterday as weaker-than-expected US data and a lacklustre performance on Wall Street added to nagging concerns about earnings, particularly in the technology sector.
European semiconductor firms sagged ahead of a mid-quarter business report from global No. 1 Intel Corp. on Thursday. Morgan Stanley cut its price target on Intel by 12.5 per cent ahead of the update, fearing weaker-than-expected revenues. Intel shares were down nearly three per cent on Wall Street.
Among European chip stocks, Germany's Infineon shed 4.3 per cent to eight euros, while Franco-Italian firm STMicroelectronics dipped 2.7 per cent to €13.91.
Other technology names also suffered along with their US counterparts, with networks firm Alcatel down 3.8 per cent and software heavyweight SAP down 2.9 per cent.
The FTSE Eurotop 300 index of pan-European blue chips closed one per cent lower at 970.1 points, while the narrower DJ Euro Stoxx 50 index also fell one per cent to 2,670.8 points.
Turnover remained modest with about €2.4 billion ($2.9 billion) traded on the Eurotop 300 index.
"All in all, the appetite for equities among both institutional and retail investors in Europe remains lacklustre," Lehman Brothers' strategists said in a note.
"History shows that buying stocks when sentiment is depressed is a profitable strategy. The problem that Europe has is that a number of the trends touched on above seem to have been more structural than cyclical."
If global sentiment recovers, however, European markets should also bounce back, Lehman Brothers added.
Stocks lost ground after data showed US consumer confidence fell sharply in August as a slowdown in employment growth and rising oil prices weighed on sentiment.
Slowing growth in mid-west manufacturing activity in August also weighed, with the National Association of Purchasing Management-Chicago business barometer falling to 57.3 from 64.7 in July.
The data set a soft tone ahead of key US payrolls data, due on Friday, which are the market's main focus of attention following two weak monthly reports.
"Both are lower than expected. We are going to take the lead from the payrolls number," said Mark Wall, an economist at Deutsche Bank.
"If (the payrolls number) bounces back, the lack of confidence consumers are showing will prove to be short-lived."
Oil prices remained an issue, with crude futures paring losses in volatile trade.
US light crude fell to a low of $41.45 a barrel before rebounding to hover around $42.30, little changed on the day but still down by more than $7 a barrel from its peak of $49.40 eight sessions ago.
In New York, the blue-chip Dow Jones industrial average was 0.3 per cent lower at 10,094.3 points, while the Nasdaq Composite Index fell 0.8 per cent to 1,821.5 points by 1617 GMT.
Around Europe, London's FTSE 100 closed 0.7 per cent weaker, Paris's CAC-40 ended down 1.2 per cent and Zurich's SMI shed 0.5 per cent.
Frankfurt's DAX closed 1.4 per cent lower, below the psychologically significant 3,800 point level.
German drugs and chemicals firm Bayer fell as its eviction from the DJ Stoxx 50 blue-chip index loomed in a rejig of the benchmark.