HELSINKI (Reuters) - Nokia (NOK1V.HE), the world’s biggest maker of mobile phones, expects the mobile market to fall in euro terms this year, it said on Thursday, knocking nearly 10 percent off its shares.

The company reported underlying first-quarter profit rose as expected, but a bigger-than-expected fall in its average selling price for phones also weighed on the stock.

Before one-off items, Nokia’s earnings per share for January-March rose, as expected, to 0.38 euros from 0.26 euros in the same period of 2007, though larger-than-expected one-off costs pushed reported EPS to 0.32 euros, missing analysts’ forecasts.

Nokia said it now expected the cellphone market would fall in euro terms in 2008, while the boom in emerging markets would lift shipment volumes by 10 percent from 2007.

“The change from our previous estimate of value growth for this market primarily reflects the negative impact of the recently weakened U.S. dollar, the general economic slowdown in the U.S., and possibly going forward some economic slowdown in Europe,” it said in a statement.

Shares in Nokia were 9.6 percent lower at 18.95 euros at 1202 GMT, its biggest intraday fall since July 2005, and almost single-handedly dragging the DJ Stoxx European technology sector index (.SX8P) down 4.4 percent.

“The possibility for some economic slowdown in Europe going forward is what we have been afraid of. Nokia’s main market, Europe, is slowing down, and the company now gives clear evidence of that,” said Carnegie analyst Janne Rantanen.

The world’s fourth-largest mobile phone vendor, Sony Ericsson, whose forte is its strongly branded and relatively expensive Walkman music and Cybershot camera phones, warned on January-March profits last month, citing weakening European markets.

Sony Ericsson’s comments came hard on the heels of a warning by chipmaker Texas Instruments (TXN.N) of weaker demand for chips for high-end 3G phones, raising fears that the global economic slowdown was starting to crimp the handset industry.

Its average selling price for phones in the first quarter also disappointed the market, falling to 79 euros from 83 euros in the previous quarter, while analysts had on average expected 81 euros.

“The major disappointment is the ASP,” said Robert Jakobsen at Jyske Bank.

Nokia, which has a strong lead in emerging markets including China and India, sold 115.5 million phones in the quarter, up 27 percent from a year earlier, and more than its three closest rivals combined.

Nokia said the figures were boosted by 40 percent growth in Asia and 63 percent in Latin America, but sales in North America fell 46 percent to 2.6 million phones, despite management’s efforts to drive sales in the region.

“With global handset revenues coming under increasing pressure in 2008, then the high-value North American market is one Nokia simply cannot afford to ignore,” said Neil Mawston, director at research firm Strategy Analytics.

Nokia Siemens Networks (NSN.UL), Nokia’s joint telecom gear making venture with Siemens (SIEGn.DE), reported a smaller-than-expected 74 million euro loss, but Nokia said it now expected to see no growth in the telecom gear market in 2008.

“The change from the previous estimate of ‘very slight growth’ for this market primarily reflects the negative impact of the recently weakened U.S. dollar,” the company said in a statement.