RTRS: Europe stocks sag; economic woes eclipse rate hopes
PARIS, Oct 2 (Reuters) - European stocks fell on Thursday, reversing a two-session recovery as bleak U.S. data rekindled recession jitters and eclipsed dovish comments made by European Central Bank President Jean-Claude Trichet.
The FTSEurofirst 300 index of top European shares unofficially closed 1.3 percent lower at 1,058.81 points, after rising to as high as 1,090.25 in intraday.
Mining and industrial stocks took a beating, with ArcelorMittal (MTP.PA: Quote, Profile, Research, Stock Buzz) sinking 8.9 percent, Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz) dropping 8 percent and Siemens (SIEGn.DE: Quote, Profile, Research, Stock Buzz) losing 4.5 percent.
Banks managed to eke out gains, led by UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) rising 8.1 percent after the Swiss lender said it will book a small profit for the third quarter and reduce its U.S. commercial and residential mortgage-related holdings.
Data showed that new orders at U.S. factories sank by an unexpectedly steep 4 percent in August, the sharpest contraction since October 2006 in a sign the credit crisis was spreading into manufacturing.
"The U.S. is tipping into recession. We're going to get more bad news on the macroeconomic front, starting with jobs data tomorrow," said Marc Touati, economist at Global Equities, in Paris.
"But we're getting to the end of the tunnel on the credit front, and if the rescue plan goes through, it will certainly help the economy," he said.
European Central Bank President Jean-Claude Trichet said economic activity was weakening in Europe and opened the door to an interest rate cut. The ECB left its main interest rate at 4.25 percent, but Trichet said policymakers considered a cut as the euro zone economy slows and inflation risks eases.
Investors were also cautious about the fate of Washington's rescue plan for the financial sector, passed by the Senate 74-25 on Wednesday night. The House of Representatives, which rocked markets worldwide on Monday by rejecting an earlier version of the bailout, is expected to vote on the bill on Friday.
The FTSEurofirst 300 has lost 30 percent so far in 2008, hit by the credit crisis that has forced banks to unveil massive asset writedowns, forced Lehman Brothers (LEHMQ.PK: Quote, Profile, Research, Stock Buzz) to file for bankruptcy and triggered government bailouts of a number of troubled financial U.S. and European institutions.
