French telecommunications equipment-maker Alcatel tumbled a dramatic 7.2 per cent to #33.40 in trading volume of 27.3 million shares following reports that it was set to launch a takeover bid for US rival Lucent Technologies.

Standard & Poor's placed Alcatel on credit-watch negative, citing the suspension earlier in the week of a $1.1 billion contract with Canada's 360 networks. Alcatel is currently rated A for long-term debt and A-1 for short term.

Elsewhere, the telecoms equipment sector was firm. Ericsson rose 5.4 per cent to SKr68.50 after it cut another 4,000 jobs in Sweden as part of a restructuring programme.

Nokia rose 2.1 per cent to #38. Deutsche Bank raised its share price targets on both Nokia and Ericsson, saying it saw "the strong getting stronger" in the industry.

Oil giant Total Fina Elf had a strong day despite conflicting signals from a number of top brokers. JP Morgan downgraded the shares from "long-term buy" to "market perform" on the basis that price performance had taken valuations to levels which "leave little upside relative to peers".

ABN Amro, which cut back on its forecast of group operating margins, reduced from "add" to "hold". Credit Suisse First Boston cut earnings estimates for this year by 14 per cent.

On a busy day for financials, Societe Generale shot up 3.5 per cent to #72.35 as speculation resurfaced that the French bank could be a bid target.

Insurer Axa put on 1.9 per cent to #35.32 as JP Morgan raised its recommendation on the French group and maintained it far value price target of #43.

"Axa is reinventing itself as a focused life and asset management group," the US investment bank said. "This requires minimal capital backing which means the valuation can start to rise relative to NAV and embedded value."