European Stocks Fall on Selloff in Mining Sector

European stocks fell on Friday, knocked lower by a sharp drop in mining shares that followed falling metal prices, while automakers retreated after a profit warning from BMW and GM's massive loss.

Irish drugmaker Elan plummeted 46 percent as a second product setback in a week shattered confidence in its line-up of biotech medicines.

Investors were also rattled by poor U.S. data that showed the unemployment rate hit its highest level in four years during July, as employers cut non-farm jobs for a seventh straight month, though less severely than predicted.

Adding to jitters on Friday, oil prices rose sharply, rekindling inflation fears and concerns over corporate costs.

The FTSEurofirst 300 index of top European shares unofficially closed 1.5 percent lower at 1,162.76 points.

"The data is in line with what we saw in the previous months...the job losses are slightly lower than what we saw earlier this year, but the unemployment rate is getting worse," said Jean-Marc Lucas, economist at BNP Paribas in Paris.

"It confirms that the job market is deteriorating and there is no reason the believe that the trend will change over the next few months, even over the next few quarters." BMW sank 5.3 percent after warning it would miss its 2008 targets and posted a 44 percent drop in quarterly pretax earnings.

The sector also got hit after General Motors said it lost another $15.5 billionand Nissan posted earnings that widely missed expectations.

Renault, which has a significant stake in Nissan, fell 3.4 percent, Daimler lost 2.1 percent and Volkswagen fell 4.1 percent.

But the heaviest negative weights on the FTSEurofirst 300 index were in the mining sector, with Rio Tinto losing 5.7 percent, Anglo American falling 5.3 percent and Xstrata dropping 6 percent.