LONDON, Jan 7: European stocks closed sharply lower on Wednesday, snapping a New Year rally as massive US job losses and profit warnings jolted investors who were hoping the worst of the global crisis might be over.

The US private sector lost 693,000 jobs in December, according to the ADP National Employment Report, way above forecasts for 493,000 and sparking fresh fears that the US economy faces major problems before any recovery.

Profit-warnings from chip giant Intel and media group Time Warner added to the negative tone, coming on top of Alcoa’s announcement of some 13,500 job cuts on Tuesday as it sheds capacity sharply to cope with slumping demand.

European markets had slipped earlier as investors took some profits on the New Year gains but then fell sharply as the US news came through and Wall Street tumbled in response.

In London, the FTSE 100 index of leading shares closed down 2.83 per cent at 4,507.51 points. In Paris, the CAC 40 index lost 1.48 per cent to 3,346.09 points and in Frankfurt the DAX shed 1.77 per cent to 4,937.47 points.

In New York, the Dow Jones Industrial Average was down more than 2.0 per cent in early trade and was showing a loss of 1.75 per cent around 1700 GMT.—AFP