Oil stocks slumped for the second day running as the outlook for crude prices was seen as turning distinctly bearish. Brent Blend sank below $18, a two-year low, amid rumours about a possible price war between Opec and non-Opec members. Cautious notes from a wide range of brokers added to the pressure on sentiment.

The FTSE Eurotop 300 sector index fell 6.9 per cent for a two-day decline of 12.6 per cent as Royal Dutch tumbled 7.1 per cent to €51.80 in mammoth 20.3 million shares traded. TotalFinaElf came off 7.1 per cent at €138.

Airline stocks continued to rebound. The latest bull argument is falling fuel costs, courtesy of weak oil prices. Lufthansa rose 9.3 per cent to €15.74 for a gain of 94 per cent since September's lows. KLM rose 8 per cent to €12.10 and Air France 10.1 per cent to €15.86.

Lower oil prices also came as good news for some companies in the chemicals sector. Switzerland's Clariant led the pack, shooting up 6.3 per cent to 30.30 Swiss francs.

Buhrmann shot higher as relief flooded the market after the office supplies group forecast said it will hit its earnings targets this year. The shares surged 38.7 per cent to €10.51.

German insurers Allianz and Munich Re put a damper on activity in Frankfurt as they gave further details of the impact of the September 11th attacks on their businesses. Munich Re, the world's largest reinsurer, slid 2.8 per cent to €297.38. Allianz lost 3.8 per cent to €260.95.

Italy's new economy bank Bipop Carire came under scrutiny on news it was under investigation by tax police. The shares, suspended for much of the morning, fell 7.6 per cent to €1.79 after trading resumed.

Siemens rallied sharply as did Philips. In late trade, Siemens was 6.4 per cent higher at €66.10 and Philips closed up 5.3 per cent at €31.55.