EUROPE/US: Stocks fell after purchases of new US homes dropped to a record low. This has renewed concern that the economic recovery in EU states may falter without further government support.

Construction companies led the declines among those shares most tied to economic growth, with CRH and HeidelbergCement sliding more than 3.8%.

Holcim dropped 2.2% as Morgan Stanley downgraded its recommendation on the world's second-largest cement-maker.

The UK's FTSE 100 dropped 1.3%, France's CAC 40 sank 1.7% and Germany's DAX retreated 1%. Greece's ASE Index sank 2.8% as that nation's government bonds fell, pushing the yield to more than 10% for the first time since 10 May.

Purchases of new homes in the US fell to a record low in May as a tax credit expired, clearly indicated that the market remains dependent on government support.

Growth in Europe's services and manufacturing industries slowed in June, adding to signs the region's recovery is cooling.

An index of construction shares posted the biggest drop among 19 industry groups in the Stoxx 600.

CRH, the world's second-largest maker and distributor of building materials, slid 3.8% to 18.36 euros.

HeidelbergCement, the third-biggest cement maker, dropped 4.1% to 42.90 euros. Wolseley, the largest supplier of heating and plumbing products, sank 5.2% to 1481p.

Holcim retreated 2.2% to 77.1 Swiss francs as Morgan Stanley cut its recommendation on the shares to 'underweight' from 'equal weight'.