RTTNews - The European markets fell on Wednesday, as banking and commodity stocks declined after weaker-than-expected U.S. economic data dampened investor sentiment about an economic recovery.

The U.S. Commerce Department said in a report that orders for manufactured goods rose 0.7% in April following a revised 1.9% drop in March. Economists had expected orders to increase by 0.9% compared to the 0.9% decrease originally reported for the previous month.

The Institute for Supply Management said its index of activity in the U.S. service sector rose to 44.0 in May from 43.7 in April, although a reading below 50 indicates a continued contraction in the sector. Economists had been expecting a somewhat more notable increase to a reading of 45.0.

A report from Automatic Data Processing, Inc. showed U.S. non-farm private employment fell by 532,000 jobs in May following a revised decrease of 545,000 jobs in April. Economists had expected a decrease of about 525,000 jobs compared to the decline of 491,000 jobs originally reported for the previous month.

Crude for July delivery fell $2.14 to $66.41 a barrel on the New York Mercantile exchange, by the time the European markets closed, after a U.S. government report said crude in storage rose by 2.9 million barrels to 366 million barrels.

The FTSEurofirst 300 index of pan-European blue chips closed 2.01% lower at 868.10 points, while the narrower DJ Stoxx 50 index fell 1.97% to 2,132.95 points.

Around Europe, the U.K.'s FTSE 100 index dropped 2.09% to 4,383.42, while France's CAC 40 index slipped 2.02% to 3,309.65 and Germany's DAX index fell 1.74% to 5,054.53.

Banking stocks were among the worst losers after the release of dour U.S. economic data. Royal Bank of Scotland, Britain's second largest bank, dropped 5.3%, while Barclays, the second largest, slipped 5% and UBS, Switzerland's largest bank, fell 4.2%. Deutsche Bank, Germany's biggest lender, lost 3.9%.

Heavily weighted oil stocks lost ground after crude oil prices retreated. BP, Europe's biggest oil company, dropped 2.2%, while Royal/Dutch Shell, the second biggest, fell 1.7% and Total, the third biggest, slipped 3%.

Similarly, mining stocks declined after copper and gold prices fell. BHP Billiton, the world's biggest miner, dipped 4.1%, while Anglo American, the second biggest, slid 6% and Rio Tinto, the third biggest, dropped 4.6%. Copper miner Antofagasta lost 4.6%.

French builder and mobile-phone operator Bouygues tumbled 7.9% after the company reported a 29% drop in first quarter profit.

STMicroelectronics, Europe's largest chipmaker, slid 4.3% and ASML Holding, the region's biggest semiconductor equipment maker, dropped 3.2% after an industry association predicted that global semiconductor sales this year will fall 10% more than previously forecast.

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