The European markets fell on Thursday, as disappointing data on unemployment in the Eurozone as well as in the United States dampened optimism about the pace of economic recovery.

Eurozone's jobless rate increased further in May, to reach the highest level in ten years, a report from the Eurostat showed today. The seasonally adjusted jobless rate climbed to 9.5% in May from a revised 9.3% in April. Economists expected the rate to come in at 9.4%. This is the highest rate since May 1999.

The U.S. Labor Department said in its report that non-farm payroll employment fell by 467,000 jobs in June following a revised decrease of 322,000 jobs in May. Economists had expected a decrease of about 365,000 jobs compared to the loss of 345,000 jobs originally reported for the previous month.

With the bigger than expected decrease in employment, the unemployment rate edged up to 9.5% in June from 9.4% in May. The increase lifted the unemployment rate to its highest level since a matching rate in August of 1983, although it was below economist estimates of 9.6%. The unemployment rate has not been higher since it was at 10.1% in June of 1983.

As was widely expected, the European Central Bank left its key interest rate unchanged at a record low for the second straight month. ECB President Jean-Claude Trichet signaled the ECB has no immediate plans to cut interest rates again and said the euro region's economy will start to recover in the middle of 2010.

Crude oil prices dropped following the release of woeful job numbers in Europe and the U.S. Crude for August delivery fell $2.55 to $66.76 a barrel on the New York Mercantile Exchange, by the time the European markets closed.

The FTSEurofirst 300 index of pan-European blue chips closed 2.62% lower at 843.00 points, while the narrower DJ Stoxx 50 index fell 2.81% to 2,075.97 points.

Around Europe, the U.K.'s FTSE 100 index fell 2.45% to 4,234.27, while France's CAC 40 index slipped 3.13% to 3,116.41 and Germany's DAX index dropped 3.81% to 4,718.49.

Banking stocks weer among the worst losers. BNP Paribas, France's largest bank, slipped 3.3%, while UBS, Switzerland's largest, fell 3.2% and Banco Santander, Spain's biggest lender, dropped 3.7%.

Heavily weighted oil stocks lost ground after crude oil prices tumbled. BP, Europe's biggest oil company, fell 2.1%, while Royal/Dutch Shell, the second biggest, slipped 3.3% and Total, the third biggest, dropped 3.8%.

Automaker's shares edged lower after Credit Suisse cut its recommendation on the industry to market weight' from overweight. Volkswagen, Europe's biggest car maker, tumbled 7.8%, while Daimler, the world's second largest maker of luxury cars, dropped 5.5% and Peugeot, France's biggest carmaker, slipped 5.4%.

Specialty chemicals maker Clariant lost 8.6% after the company said it plans to sell 225 million Swiss francs of convertible bonds.

On the other hand, Irish drugmaker Elan jumped 19% after Johnson & Johnson agreed to take over the Irish company's costs to develop medicines against Alzheimer's disease and pay $1 billion for an 18.4% stake.

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