European stocks fall on renewed economic worries

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: Quote, Profile, Research). 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: Quote, Profile, Research) warned of slowing orders, fuelling concerns about a downturn in business spending. GlaxoSmithKline Plc (GSK.L: Quote, Profile, Research), 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."