European shares fell to a one-month closing low on Tuesday as disappointing US housing data underscored concern over the pace of recovery in the world's largest economy. The pan-European FTSEurofirst 300 index of top shares closed down 1.6 percent at 1,019.52 points, its lowest close since late July, after ending higher a day earlier on a pick-up in merger and acquisition activity.
Data showed sales of existing US homes fell more steeply than expected in July to a 15-year low, suggesting the economic recovery could be losing momentum. The downbeat data also drove investors into safe-haven bonds, with German Bund futures hitting a new record high. Volumes on the FTSEurofirst 300 were thin at 70 percent of the index's 90-day daily average due to the holiday season.
Economy worries weighed on construction and materials stocks , with Ireland's CRH plunging 16.6 percent after warning earnings would fall this year due to a faltering US economy. Within the sector, HeidelbergCement, Holcim and Wolseley dropped 1.3 to 5.1 percent. Lafarge shed 4.4 percent after broker BofA Merril Lynch downgraded its recommendation on the stock to "underperform" from "neutral". Concerns over the economic recovery also pressured oil majors, with a fall in crude prices to $72 a barrel - its lowest since early July - also weighing on the sector.
The STOXX Europe oil and gas index fell 2.3 percent, with BP , Royal Dutch Shell and Total declining 1 to 3.4 percent. Vedanta Resources was among the biggest fallers in the mining sector, down 7.6 percent after India's environment ministry rejected a plan by the group to mine bauxite in an eastern Indian state. Within the sector, Kazakhmys, Xstrata, Rio Tinto and BHP Billiton lost 1.5 to 4.3 percent, with worries over the demand for metals pressuring the sector following the disappointing US home sales data.
Bucking the weak trend, Associated British Foods rose 3.4 percent on a positive broker note from Jefferies International, which said the firm offered excellent deep value. Lindt & Spruengli rose 2.8 percent after the Swiss chocolate-maker posted better-than-expected first-half results, and said it expected to return to its long-term growth targets next year. Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC 40 were down 1.3 to 1.8 percent.