Europe shares fall after US jobless tally soars

LONDON, July 2 (Reuters) - European shares closed lower on Thursday after U.S. employers cut far more jobs than expected, casting further doubt on the strength of economic recovery.

The pan-European FTSEurofirst 300 index fell 2.5 percent to a provisional close of 844.46 points.

The European benchmark index is still up more than 30 percent from its lifetime low of March 9, but the rally has stalled in recent weeks on lack of evidence of economic recovery.

The heavyweight banking sector took most points off the index. BNP Paribas (BNPP.PA: Quote, Profile, Research), Banco Santander (SAN.MC: Quote, Profile, Research), Commerzbank (CBKG.DE: Quote, Profile, Research), Credit Suisse (CSGN.VX: Quote, Profile, Research), HSBC (HSBA.L: Quote, Profile, Research), Societe Generale (SOGN.PA: Quote, Profile, Research), UBS (UBSN.VX: Quote, Profile, Research) and UniCredit (CRDI.MI: Quote, Profile, Research) were down between 1.8 and 6.5 percent.

The U.S. labour market continued to struggle with a deep recession. A loss of 467,000 jobs in June compared with the 363,000 consensus of Wall Street economists polled by Reuters and broke a four-month trend of moderation in job losses.

The unemployment rate rose to 9.5 percent, though initial claims fell by 16,000 last week. [ID:nN02549309]

"Clearly the market is concerned about the unemployment data," said Mike Lenhoff, chief strategist at Brewin Dolphin Securities, in London. "And there's a sense of disappointment about the inability of the market to sustain the momentum to hold key psychological levels."

The Euro zone jobless rate, also 9.5 percent, was a 10-year high in May, data showed. [ID:nL2714438]

The European Central Bank kept euro zone interest rates at 1.0 percent, bolstering expectations they will stay there well into next year, and said it would start buying bonds next week.