Eurostoxx 50: 2,782.57 (-45.09) Frankfurt DAX: 7,074.12 (-143.31) Paris CAC: 3,889.87 (-74.94)EUROPEAN SHARES fell sharply for a second straight session to a six-week closing low yesterday as more US data raised concerns about the pace of recovery in the world's top economy.

A 9.2 per cent surge in the Euro Stoxx 50 volatility index, one of Europe’s main barometers of sentiment, suggested a fall in investors’ appetite for risk. Analysts said equities could drop further before bouncing back after the summer.

The uncertain outlook prompted traditional long-only funds to stay on the sidelines, analysts said, adding investors had been taking refuge in defensive sectors such as utilities and pharmaceuticals, at the cost or sectors such as mining.

Miners topped the losers’ list, with the Stoxx Europe 600 Basic Materials index falling 2.6 per cent, tracking steep losses in metals that slipped on concerns about demand for raw materials. Rio Tinto fell 2.6 per cent.

The FTSEurofirst 300 index of top European shares finished 1.3 per cent lower at 1,115.92 points – the lowest close since mid-April. The index is down 0.5 per cent this year.

US figures showed new orders received by US factories declined in April and chain-store sales in May were lacklustre. Initial claims for US state unemployment benefits slipped by 6,000 to a seasonally adjusted 422,000, less than economists’ expectations for a fall to 415,000.

Energy shares tracked weaker crude oil. The Stoxx Europe 600 oil and gas index fell 2 per cent in high volumes.

The numbers followed Wednesday’s data, which showed the US national factory activity index in May was lower than expected. Private sector job growth fell to its lowest in eight months, prompting Goldman Sachs and other banks to cut their estimates for Friday’s widely watched no-farm jobs data.

Lingering concerns about euro zone debt also weighed on the market. Moody’s on Wednesday downgraded Greece by three notches deep into junk territory, citing a growing risk that Athens would have to restructure its debt.

“Whether or not a further restructuring plan is agreed, Greece will at some point have little option but to default. Of course it does matter, not least because it further destroys what little market confidence exists.”

Greek banking shares dropped 0.3 per cent. – (Reuters)