Does anyone know of handicraft shops in the Algarve? My wife is particularly interested in cross stitch but also other handicraft items.

Apparently there is a craft shop in Alvor. Unfortunately I don't know much more than that.

There is a very nice shop in Alvor - went in there last September for some 'retail therapy' when it was raining - big mistake - it has some lovely jewellry (not cheap), hand made patchwork jackets and unusual pictures amongst other things but don't think it was the embroidery type of craft shop. This shop was on a corner on the right hand side going up the street towards the market - can't remember what it was called - sorry!

Look around Portimao. Lisbon would be your best bet though!