LONDON, Aug 1: European shares extended their falls on Thursday afternoon, after forward-looking data threw up further evidence that the US economic recovery was wavering, narrowing the odds of a double-dip recession.

Heavyweight energy and financial stocks led the downturn after disappointing results from Anglo-Dutch major Royal Dutch/Shell and British bank Barclays.

Everything that has come out of the United States over the last few weeks has been weak. There’s no doubt that the double-dip argument is gaining momentum, said Peter Ostler, head of research at futures brokers GNI.

The Institute of Supply Management’s influential US manufacturing activity index for July slumped to 50.5 from 56.2 rather than the 55.1 score widely-expected.

That brought the index very close to the 50-points mark, below which readings are consistent with economic contraction.

The report also followed GDP data on Wednesday that showed activity in the world’s biggest economy slowed abruptly in the second quarter.

The FTSE Eurotop 300 index shed 2.5 per cent to 935 points, having been up over one per cent in the morning and having bounced some 10 per cent from last week’s five year lows.

The narrower Euro Stoxx 50 index of euro zone blue chips shed 3.1 per cent to 2,604 points.

In Switzerland, where there was a public holiday but markets remained open, the Swiss Market Index fell 0.5 per cent.

In New York, the Dow Jones industrial average lost 1.9 per cent and the tech-laden Nasdaq Composite fell 1.8 per cent.

The heavyweight oil and financial sectors together make up about 35 per cent of the market and accounted for much of the Eurotop’s fall.

Shares in Royal Dutch/Shell fell 5.2 per cent in Amsterdam after the world’s No.3 oil company reported a 38 per cent year-on-year fall in second quarter profits, largely due to weak refining margins.

Also down were shares in Europe’s biggest oil group BP and France’s TotalFinaElf.

Allianz pulled the rug from under recovering financials after the German banking and insurance giant said late on Wednesday that it was abandoning its aim of three billion euros in profit for the full year and reported a loss of 350 million euros in the second quarter.

Shares in Allianz slipped 4.6 per cent and those of French rival Axa slumped 8.5 per cent as investors fretted over the group’s first-half turnover figures due next Thursday, having appeared to be recuperating from the solvency fears which sent insurance shares sprawling last month.

Barclays added to the negative tone by announcing a six per cent drop in first-half profits and a 43 per cent hike in bad loans, which it blamed on the protracted crisis in Argentina.

However, Germany’s Deutsche Bank and UK-based insurer Aviva bucked the weaker financial trend after impressing with their earnings.

Shares in Deutsche Bank rose 1.5 per cent after it posted a 35 per cent jump in second quarter pre-tax profits that beat analysts’ expectations.

Britain’s biggest insurer by market share Aviva reported first half profits, boosting its shares by almost 12 per cent.—Reuters