PARIS, Feb 7 (Reuters) - European stocks fell to their lowest close in two weeks on Thursday as a rate cut by the Bank of England and a more dovish tone from the European Central Bank failed to soothe worries about a global economic downturn.
Tech shares were among the worst hammered, led by Infineon (IFXGn.DE). The German chipmaker tumbled 14 percent after posting weak quarterly results and saying its Com phone chips unit would remain unprofitable over the full fiscal year.
The sector also retreated after U.S. networking equipment maker Cisco Systems Inc (CSCO.O) warned of slowing orders, fuelling concerns about a downturn in business spending. GlaxoSmithKline Plc (GSK.L), Europe’s biggest drugmaker, sank 7.6 percent after it warned 2008 earnings would fall due to sliding sales of diabetes drug Avandia and more generic competition.
The FTSEurofirst 300 .FTEU3 index of top European shares closed 1.9 percent lower at 1,296.40 points. Europe's benchmark index has lost 14 percent so far in 2008, dragged lower by fears of a U.S. recession.
A 25 basis-point interest rate cut by the BoE failed to boost equities, while European stocks slightly trimmed their losses after European Central Bank President Jean-Claude Trichet said euro zone growth risks were to the downside.
The ECB earlier kept rates on hold at 4.0 percent.
“We get the impression that the markets were almost willing a sign from Trichet today that the ECB will cut rates soon,” Steve Barrow, Bear Stearns chief currency strategist, wrote in a note.
“Trichet has given the market some hope on this score, but probably not as much as the market is making out given the fall in the euro. It certainly does not look as if the ECB will cut in March, unless things turn south in a big way on the economy.”
On the data front, a U.S. report showed that new applications for U.S. unemployment benefits fell by 22,000 last week, but the number of workers remaining on jobless aid rose to its highest level in more than two years.
U.S. retailers including Wal-Mart Stores (WMT.N) also added to the gloom by reporting results that suggested the economy was sliding.
European banks, hammered over the past six months by fears over the impact of a meltdown in the U.S. risky subprime mortgage market, lost ground Again on Thursday, with HSBC (HSBA.L) down 2.2 percent, Royal Bank of Scotland (RBS.L) down 3.6 percent and UBS UBSN.VX down 2.7 percent.
Deutsche Bank (DBKGn.DE) bucked the trend, gaining 0.4 percent after Germany’s biggest listed lender said its fourth-quarter results contained no big mortgage-related writedowns.
The DJ Stoxx bank index .SX7P is down 35 percent from its 52-week high reached last April and is the worst performing European sector.
Since the start of the year, the DAX has lost nearly 17 percent, the FTSE is down 11 percent and the CAC is down 16 percent.
France Telecom FTE.PA gained 3.6 percent, boosted by a media report saying the French government was not preparing to sell a stake in the company, and denying speculation such a sale was imminent.
Rolls-Royce Group (RR.L) fell 10 percent on disappointment in the market that the British engine maker only raised its dividend by a third.
BT Group (BT.L) dropped 9.8 percent after the company said lower revenue at its wholesale division hit overall turnover for the third quarter. (Editing by Sue Thomas)