RTTNews - The European markets fell for the first time in three days on Friday, as investors worried that weak U.S. consumer confidence will slow the pace of recovery in the world's largest economy.

The Reuters/University of Michigan preliminary index of U.S. consumer sentiment fell to 63.2 in August from 66.0 in July. The decrease surprised economists, who had been expecting the index to increase to 69.0.

The U.S. Labor Department said its consumer price index was unchanged in July after increasing by an unrevised 0.7% in June. The lack of growth in consumer prices came in line with the expectations of economists.

Excluding the decreases in food and energy prices, the core consumer price index edged up 0.1% in July following a 0.2% increase in the previous month. Economists had expected the index to increase by 0.1%.

Crude for September delivery fell $2.61 to $67.91 a barrel on the New York Mercantile Exchange, by the time the European markets closed, after the U.S. consumer sentiment data were released.

The FTSEurofirst 300 index of pan-European blue chips closed 0.81% lower at 940.94 points, while the narrower DJ Stoxx 50 index fell 0.94% to 2,325.17 points.

Around Europe, the U.K.' FTSE 100 index slipped 0.87% to 4,713.97, while France's CAC 40 index fell 0.83% to 3,495.27 and Germany's DAX index dropped 1.70% to 5,309.11.

Economic sensitive banking stocks were among the worst losers. HSBC, Europe's largest bank, slipped 2.8%, while Deutsche Bank, Germany's biggest lender, fell 2% and Credit Suisse, Switzerland's second largest bank, dropped 2.1%.

Volkswagen, Europe's biggest carmaker, tumbled 15.6% on fears that it was overpaying for a stake in the sports car unit of Porsche and on plans for an issue of preference stock.

Shares of phone companies lost ground after Bank of America downgraded the European phone stocks to neutral from overweight. Vodafone, the world's biggest mobile-phone company, slipped 2%, while Deutsche Telekom, Europe's biggest phone company, fell 1.7% and France Telecom, Europe's third biggest phone company, declined 1.8%.

Air France-KLM, Europe's largest airline, lost 3.6% after Citigroup downgraded the stock to sell from hold.

On the other hand, Swatch Group, the world's largest watchmaker, jumped 13% after the company reported first-half profit that fell from last year but came in above analysts' expectations.

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