German technology group Siemens and retailers, knocked by a profit warning from Britain's Dixons, led European shares lower yesterday afternoon.
A weak opening on Wall Street added to the downward pressure while worry over the health of the consumer, lynchpin of economic recovery, deepened amid signs of companies pushing back capital spending even further.
By 1447 GMT, the FTSE Eurotop 300 was down 1.1 per cent at 874 points, while the narrower DJ Euro Stoxx 50 shed 1.3 per cent to 2,471 points as benchmarks cling on to stay in positive terrain for the year.
Declining issues outpaced advancers by a hefty four-to-one margin, with volume steady.
Shares in Dixons, the UK's top electrical goods retailer, sank 21 per cent to 116-1/4 pence, hitting a four-year low after the company warned it would miss profit forecasts following weaker-than-expected Christmas sales.
The news, coming hard on the heels of dismal German retail numbers earlier in the week, caused unease among analysts who fear consumer confidence is cracking.
The consumer accounts for about two-thirds of economic activity and, in the absence of capital spending by cash-strapped firms, is a lone recovery motor.
"We are seeing consumer confidence weakness across Europe and the worry is that this part of the economy will weaken further," said Saul Henry, a European strategist at UBS Warburg investment bank.
"We are cautious about having too much consumer exposure. We are more worried about consumer cyclicals like autos while food retailers have defensive qualities," Henry said.
Elsewhere in the retail sector, French department store operator Pinault-Printemps-Redoute sank 7.2 per cent to 64.60 euros, Britain's GUS shed 5.7 per cent to 543 pence, and Germany's Karstadt Quelle dropped 4.7 per cent to €15.40.
Bucking the downward trend, British clothing retailer Next rose 3.4 per cent to 771-1/2 pence after it said full-year profit would at least match market forecasts despite tough trading conditions over the Christmas period.
On Wall Street, the Dow Jones industrial average dropped 0.5 per cent to 8,695 points. The Nasdaq Composite fell 0.6 per cent to 1,423 points.
The technology sector also felt the wrath of investors who fear recovery is continually being pushed back.
Siemens fell 4.5 per cent to €42.59, weighed by a general pullback in the sector and UBS Warburg cutting its price target on the stock.