Europe's technology and telecom stocks were badly buffeted as IBM's results and the sight of the Dow falling below 10,000 triggered panic selling. Many shares followed the Nasdaq down in the afternoon, rebounding as US losses moderated.
Bellwethers Nokia and Ericsson both fell by double figure percentages at one point. Nokia closed 5.8 per cent down at €35.81, its lowest since December 2nd, while Ericsson fell by 6.4 per cent to €138.
The Finnish mobile operator Sonera, a prime takeover target in consolidating European telecoms, dipped below €20 before closing down 2 per cent at €21.25, less than a quarter of its €97 peak in March.
Telecoms equipment maker Alcatel stemmed some of its decline to end 8.2 per cent off at €69.50.
Mr Joe Rooney, global strategist at Lehman Brothers, said: "It is a continuation of what we've been seeing since March. The speculative excesses in tech and telecoms are gradually being unwound."
Nevertheless, Mr Mark Howdle at Schroder Salomon Smith Barney, said that the falls are opening up buying opportunities "although it never looks like that in the middle of a panic". In the next few months he expects to see bounce-backs in the technology and telecoms sectors, and also banks.
The rout was bad timing for today's start of the Italian mobile phone licence auction. Bidders will be Telecom Italia Mobile, Omnitel (controlled by Vodafone), Wind (majority owned by Enel) and Blu.
The board of Blu, Italy's number four mobile phone group which is 20 per cent owned by British Telecommunications, held an emergency meeting last night to try to settle a dispute between BT and other shareholders.
Falls in chip stocks moderated as the Philadelphia semiconductor index opened higher. Chip equipment maker ASM Lithography, down in double figures at one point, closed 4.3 per cent lower at €28.38. Infineon was trading about 1 per cent lower at €46 towards the end of the session while STMicroelectronics closed 2.7 per cent up at €51.70.
The Internet sector continued to struggle. T-Online fell more than 6 per cent to a new low of €20.30 and Wanadoo fell 5.4 per cent to €13.58.
