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Paris - European shares dropped on Friday, extending their recent pull-back and tracking steep losses in equities worldwide on mounting worries over the pace of global growth.
Chip makers featured among the biggest losers, with Infineon down 4.9% and STMicroelectronics down 3.7% after a sales warning from US-based Microchip. It said it believes an industry correction has begun and that more bad news will be coming from other chip makers.
Microchip cut its forecast for fiscal second-quarter results, after experiencing subdued sales in September, especially in China, a month that is normally peak production season for devices destined for consumers buying electronics ahead of the year-end holidays.
The company is seen as an early indicator of demand in the global semiconductor industry because it is a highly diversified supplier of electronic components to some 80 000 customers and because it recognizes revenue when its distributors book sales to customers rather than simply when Microchip itself ships its products.
"Microchip noted that it was disappointed with the level of business activity and that sales in September did not materialize according to expectations. It also noted that the revenue miss was led by China. This is negative for both Infineon and STM," a Paris-based trader said.
Shares of mining and energy firm Vedanta Resources also fell sharply, by 6.4%, after the company reported lower quarterly output at its oil and gas, zinc and Zambian copper businesses.
At 09:40, the FTSEurofirst 300 index of top European shares was down 0.6% at 1 305.99 points, hitting a level not seen since early August. The benchmark index has tumbled 7.5% since mid-September.
The sell-off comes on the back of weak data from Germany, Europe's biggest economy. On Thursday, data showed German exports in August fell the most since January 2009, and figures earlier in the week showed steep drops in industrial orders and output.
European markets were tracking a sell-off in equities globally, which saw major US stock indexes slide 2% on Thursday on worries about the global growth outlook.
"Bad economic data is now being viewed as bad, and the dovish signals from central banks are now being taken as a sign of weakness rather than a reason to ramp up equities," Jonathan Sudaria, a trader at Capital Spreads, said in a note.
The sell-off has prompted U.S.-based investors to cut their exposure to Europe, according to data from Thomson Reuters Lipper which shows European equities suffering their biggest outflows in two months in the seven-day period ended Octover 8.
A Lipper poll of 109 US-domiciled funds invested in European stocks, which include exchange-traded funds' (ETFs) holdings, shows net outflows of $329m, the biggest weekly redemptions since mid-August.
