* FTSEurofirst 300 closes 1.5 pct lower in broad retreat
* Weak economic data fuels inflation fears in the euro zone
* Energy stocks fall along with oil prices
By Blaise Robinson
PARIS, Sept 3 (Reuters) - European share prices retreated on
Wednesday, ending at their lowest closing level in a week, as
weak economic data for the euro zone fuelled fears of a
recession in the region.
The FTSEurofirst 300 <> index of top European shares
closed 1.5 percent lower at 1,181.90 points.
Data showed that falling investment and private consumption
led to the first ever quarterly contraction in the euro zone
economy from April to June, while July retail sales and August
services sentiment signalled more weakness ahead.
Tech and consumer-related shares lost ground, dragged down
by worries over the euro zone outlook.
Nokia <NOK1V.HE> fell 4.6 percent, LVMH <LVMH.PA> lost 3.1
percent, Unilever <ULVR.L> dropped 3.4 percent and Danone
<DANO.PA> shed 4.4 percent.
"The economic environment remains gloomy, especially in the
euro zone where we're getting a flow of negative news. The euro
zone is suffering more from the U.S. downturn than people had
initially thought," said Romain Boscher, head of equity
management at Groupama Asset Management, in Paris.
"Economic indicators come in either in line with
expectations -- but expectations are already for a recession --
or worse than forecast, like in the case of retail sales or
investment levels."
News of the demise of a hedge fund partly owned by Wall
Street firm Lehman Brothers <LEH.N> rattled investors and
weighed on banking shares.
BNP Paribas <BNPP.PA> fell 1.3 percent, Royal Bank of
Scotland <RBS.L> shed 1.9 percent and Bank of Ireland <BKIR.I>
lost 2.4 percent.
Airline stocks were among the biggest losers, surrendering
some of their recent lofty gains sparked by the drop in oil
prices.
The International Air Transport Association (IATA) said on
Wednesday the global airline industry is set to post losses of
$5.2 billion this year and $4.1 billion in 2009 as high oil
prices take their toll.
British Airways <BAY.L> dropped 3.9 percent, Ryanair <RYA.I>
fell 4.2 percent and Air France-KLM <AIRF.PA> shed 1 percent.
Energy shares also got hit, falling along with crude oil
prices. Repsol <REP.MC> fell 1.2 percent and Total <TOTF.PA>
lost 2.3 percent.
Miners also took a beating, despite mixed metal prices. Rio
Tinto <RIO.L> lost 4.7 percent and Anglo American <AAL.L> shed
3.3 percent.
Investors were also bracing themselves for interest rate
decisions by both the Bank of England and the European Central
Bank, due on Thursday.
Although the ECB is expected to keep the benchmark borrowing
cost at 4.25 percent, the focus will be on remarks by President
Jean-Claude Trichet that could give clues on the outlook for
rates.
"We're expecting the status quo. Despite the recent sharp
drop in commodity prices the central bank could remain very
cautious, also because the recent fall in the euro versus the
dollar is not helping the inflation outlook," Boscher said.
The weak euro zone data released on Wednesday sent the euro
currency <EUR=> sinking to a new eight-month low against the
U.S. dollar.
"Conditions have undoubtedly worsened considerably in recent
months," BNP Paribas economists wrote in a note.
"Several factors undermined eurozone activity, including the
deteriorating external environment, the strength of the euro, the
surge in oil and food prices and last, but not least, the
tightening of monetary and credit conditions."
The FTSEurofirst 300 has lost 22 percent so far this year,
hit by inflation and recession fears as well as by the impact of
a crisis in the credit market on banks' balance sheets.
On the other side of the Atlantic, both the Dow Jones
industrial average <> and the S&P 500 Index <.SPX> have
fallen 14 percent so far this year.
Around Europe on Wednesday, Germany's DAX index <>
lost 0.8 percent, UK's FTSE 100 index <> shed 2.2 percent
and France's CAC 40 <> fell 2 percent.
Among the few stocks on the rise, Michelin <MICP.PA> gained
2.3 percent after Credit Suisse raised its rating on the French
tyre maker's stock, citing improved margin stability and a fall
in oil prices.
(Editing by Greg Mahlich)
