* FTSEurofirst 300 drops 1.4 pct, ending a 2-day recovery
* Bleak U.S. data rekindle recession fears
* Miners, industrials, energy stocks among the most hit
* Embattled Swiss lender UBS surges on recovery hopes
By Blaise Robinson
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
closed 1.4 percent lower at 1,057.51 points, after rising as
high as 1,090.25 during the day.
Mining and industrial stocks took a beating, with
ArcelorMittal <MTP.PA> sinking 9.3 percent, Rio Tinto <RIO.L>
dropping 7.9 percent and Siemens <SIEGn.DE> losing 4.6 percent.
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.
Banks managed to eke out gains, led by UBS <UBSN.VX> 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 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," Touati said.
"Stocks will remain in the doldrums for a few months, and
after that investors will start anticipating the economic
recovery, and we should see a rally at the end of the year or
early next year."
Investors, seeking insight on the health of the U.S.
economy, will keep a close eye on U.S. monthly jobs data, due at
1230 GMT on Friday.
RATE CUT HOPES
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 eurozone economy slows and inflation risks eases.
Trichet said ECB policymakers recognised "the extraordinary
high level of uncertainty stemming from latest developments" in
the turmoil on financial markets and the credit crisis.
"Despite the "no change" vote today, there is now a
widespread expectation that rates in the ECB will be heading
downward soon, possibly by the end of the year," Paul Niven,
head of asset allocation at F&C, wrote in a note.
"This is a function of the pain which is expected to be
inflicted on the eurozone economy from global slowdown and the
ongoing impact of deleveraging and credit restraint, both of
which should help to quell inflation."
Shares of European automakers tumbled on Thursday, hit by
disappointing U.S. September sales data. BMW <BMWG.DE> fell 4.7
percent, Volkswagen <VOWG>DE> shed 4.1 percent and Renault
<RENA.PA> sank 6.9 percent.
Around Europe, Germany's DAX index <> was down 2.5
percent, UK's FTSE 100 index <> fell 1.8 percent and
France's CAC 40 <> dropped 2.3 percent.
The FTSEurofirst 300 has lost 30 percent so far in 2008, hit
by the credit crisis that has prompted banks to unveil massive
asset writedowns, forced Lehman Brothers <LEHMQ.PK> to file for
bankruptcy protection and triggered government bailouts of a
number of troubled financial U.S. and European institutions.
(Editing by Quentin Bryar)
