Euro Stocks End Lower on US Recession Fears

European equities dropped on Wednesday, ending at their lowest close in 1-1/2 month as worries over the prospect of a U.S. recession rattled investors, while retail shares sank after Mark and Spencer's profit warning.

The FTSEurofirst 300 index of top European shares unofficially closed 1.2 percent lower at 1,449.72 points. The index has already lost 3.8 percent in 2008, retreating in four of the six first sessions of the year.

Shares of European retailers were among the most hit, with Marks & Spencer tumbling 19 percent after reporting its worst quarterly performance in two years and warning the pain for Britain's retailers could extend into 2009.

Other retailers got hammered, with Tesco down 5.3 percent and Carrefour, the world's second largest retailer, down 1.6 percent.

"The market is getting worried about all these profit downgrades coming through, particularly in the retail sector, and there are surely more of them in the pipeline for the first quarter," said Bert Jansen, an equity strategist at Exane BNP Paribas, in Paris.

"It will be a battle between the profit downgrades and the cuts in interest rates. I think that the rate cuts should prevail, but it will be a close call."