By Blaise Robinson
PARIS, Feb 7 (Reuters) - European stocks fell to their
lowest close in two weeks on Thursday as a rate cut by the Bank
of England and a more dovish tone from the European Central Bank
failed to soothe worries about a global economic downturn.
Tech shares were among the worst hammered, led by Infineon
<IFXGn.DE>. The German chipmaker tumbled 14 percent after
posting weak quarterly results and saying its Com phone chips
unit would remain unprofitable over the full fiscal year.
The sector also retreated after U.S. networking equipment
maker Cisco Systems Inc <CSCO.O> warned of slowing orders,
fuelling concerns about a downturn in business spending.
GlaxoSmithKline Plc <GSK.L>, Europe's biggest drugmaker,
sank 7.6 percent after it warned 2008 earnings would fall due to
sliding sales of diabetes drug Avandia and more generic
competition.
The FTSEurofirst 300 <> index of top European shares
closed 1.9 percent lower at 1,296.40 points. Europe's benchmark
index has lost 14 percent so far in 2008, dragged lower by fears
of a U.S. recession.
A 25 basis-point interest rate cut by the BoE failed to
boost equities, while European stocks slightly trimmed their
losses after European Central Bank President Jean-Claude Trichet
said euro zone growth risks were to the downside.
The ECB earlier kept rates on hold at 4.0 percent.
"We get the impression that the markets were almost willing
a sign from Trichet today that the ECB will cut rates soon,"
Steve Barrow, Bear Stearns chief currency strategist, wrote in a
note.
"Trichet has given the market some hope on this score, but
probably not as much as the market is making out given the fall
in the euro. It certainly does not look as if the ECB will cut
in March, unless things turn south in a big way on the economy."
On the data front, a U.S. report showed that new
applications for U.S. unemployment benefits fell by 22,000 last
week, but the number of workers remaining on jobless aid rose to
its highest level in more than two years.
U.S. retailers including Wal-Mart Stores <WMT.N> also added
to the gloom by reporting results that suggested the economy was
sliding.
European banks, hammered over the past six months by fears
over the impact of a meltdown in the U.S. risky subprime
mortgage market, lost ground Again on Thursday, with HSBC
<HSBA.L> down 2.2 percent, Royal Bank of Scotland <RBS.L> down
3.6 percent and UBS <UBSN.VX> down 2.7 percent.
Deutsche Bank <DBKGn.DE> bucked the trend, gaining 0.4
percent after Germany's biggest listed lender said its
fourth-quarter results contained no big mortgage-related
writedowns.
The DJ Stoxx bank index <.SX7P> is down 35 percent from its
52-week high reached last April and is the worst performing
European sector.
Around Europe, Germany's DAX index <> lost 1.7
percent, UK's FTSE 100 index <> dropped 2.6 percent and
France's CAC 40 <> shed 1.9 percent.
Since the start of the year, the DAX has lost nearly 17
percent, the FTSE is down 11 percent and the CAC is down 16
percent.
France Telecom <FTE.PA> gained 3.6 percent, boosted by a
media report saying the French government was not preparing to
sell a stake in the company, and denying speculation such a sale
was imminent.
Rolls-Royce Group <RR.L> fell 10 percent on disappointment
in the market that the British engine maker only raised its
dividend by a third.
BT Group <BT.L> dropped 9.8 percent after the company said
lower revenue at its wholesale division hit overall turnover for
the third quarter.
(Editing by Sue Thomas)
