European shares fell further in afternoon trade on Thursday after new data showed U.S. employers cut 467,000 jobs in June, far more than expected and increasing the U.S. unemployment rate to 9.5 percent.
At 1300 GMT the pan-European FTSEurofirst 300 index was down 1.8 percent at 850.26 points after hitting the session's low of 849.27. The benchmark index jumped 1.8 percent on Wednesday.
Investors were also digesting ECB President Jean-Claude Trichet's news conference after the European Central Bank held euro zone interest rates at 1.0 percent and markets expect it to hold them at the all-time low for much of next year to help repair the region's economy.
Earlier Sweden's central bank shocked markets by cutting its interest rates by a further 25 basis points to 0.25 percent.
The heavyweight banking sector took most points off the index. BNP Paribas, Banco Santander, Commerzbank, Credit Suisse , Societe Generale, UBS and UniCredit were down between 1 and 5.3 percent.
In the United States, data showed a labour market continuing to struggle with a deep recession. The June job losses were more than 100,000 greater than the 363,000 consensus forecast of Wall Street economists polled by Reuters and broke a four-month trend of moderation in job losses.
"The U.S. unemployment rate continues to creep towards the 10 percent mark. As long as jobs are lost it's difficult to see a near-term end to this recession," said Manoj Ladwa, senior trader at ETX Capital in London.
"The reported figure has taken the market by surprise and will throw cold water on any talks of a recovery."
After a steep rise since early March, the European benchmark index has traded choppily in a narrow range since mid-June, as has the U.S. S&P 500 index.
ENERGY SHARES FALL
Energy shares fell after a bigger than expected rise in U.S. gasoline stocks and renewed global financial weakness concerns pushed the crude oil price below $68 a barrel.
BP, Royal Dutch Shell and Total fell between 1.6 and 3 percent.
But Repsol shares rose 2.7 percent after the Spanish oil major said it had received several offers for a stake in its Argentine unit, YPF.
Shares in Irish drugs company Elan Corp soared 26 percent after Johnson & Johnson said it would take over most of the company's Alzheimer's research and invest $1 billion in new shares. J&J will get an 18.4 percent stake in Elan.
Futures for the Dow Jones, S&P 500 and Nasdaq were down between 0.8 and 1.3 percent.
