German equities fell back on profit-taking and Frankfurt lost ground for the first time in three sessions.
Deutsche Telekom, up 12 per cent in two days, came off steeply and investors also locked in returns among big insurance stocks as bonds and the euro weakened.
Telekom fell €1.75 to €47.26 in robust trading of 9.2 million shares as technology counters softened. Infineon lost 65 cents at €74.35 and SAP €1.18 at €308.30.
Euro weakness and worries about interest rate trends hit financials. Munich Re gave up €4.80 at €309 and Allianz €4.80 at €379.90.
Commerzbank stayed under a cloud on earnings dilution concerns and negative broker comment.
Lehman Brothers expects Commerzbank's €2.2 billion capital issue to dilute 2000 earnings by 8 per cent. It has cut its target price for the shares by 6 per cent to €31.
In the Neuer Markt, Linos continued to surge, adding a further €6.90 at €80.40, against Monday's flotation price of €37. But IPO Lycos Europe fell €2.23 or almost 18 per cent to €10.25 on disappointing results. The Xetra Dax index was off 47.39 at 7,398.17 at 5.30 p.m. German time.
Paris fell 1 per cent as a weak sector weighed on most European bourses.
France Telecom, which has outperformed the European telecoms sector recently, fell victim to profit-taking, losing 4.6 per cent to €144.50. Its first-half results are due out today after the market closes and analysts are expecting them to show lower profit margins.
Telecoms equipment maker Alcatel fell 2.6 per cent to €94.50 and Bouygues 3.4 per cent to €72. But network services provider Equant was up 4.2 per cent to €51.70 following Deutsche Bank's reiteration of its "buy" recommendation. The stock, up 10 per cent on Monday, was also helped by recurring rumours that it might be a takeover target for US telecom company Sprint.
Drugs company Sanofi-Synthlabo was the biggest riser in the CAC, gaining 6.3 per cent to €60.10 after reporting a steeper-than-forecast increase of 58 per cent in first-half profits. CDC Bourse upgraded the shares from "underperform" to "outperform". Sanofi shares had been under pressure on Monday on rumours that the number two at the company, Herve Guerin, would announce his departure.
Oil company Total Fina Elf was down 0.3 per cent to €177.50 ahead of its results due out today.
The CAC 40 index lost 65.57 to 6,856.76. Decliners outnumbered advancers by 21 to 17 with two unchanged.
