Steel stocks provided some of the day's sharpest gains as black clouds regathering over the TMT sectors sent investors scurrying after old economy bargains.

Sterling's easier trend, plus a sector upgrade at UBS Warburg sent Anglo-Dutch giant Corus ahead by 13.9 per cent in some of the best volume of the session. Usinor, Thyssen Krupp, Aceralia and VA Stahl were also keenly sought.

Corus jumped from €1.01 to €1.15 in 20.2m shares traded after the broker lifted the stock from `buy' to `strong buy' as part of a move from underweight to overweight on the sector.

Sentiment was also aided by the 6 per cent slide for sterling against the euro over the past four weeks. This has boosted the export fortunes of the former British Steel end of the group.

UBS Warburg says industry de-stocking is likely to end in the second quarter of next year. "This will make the current cyclical downturn short and limit its impact on earnings."

Usinor and VA Stahl were moved to strong buy, while Thyssen was upgraded from hold to buy. Usinor, where the target price was raised to €16, ended up 1.5 per cent at €12.97. Thyssen Krupp gained 2.6 per cent at €15.85 and VA Stahl 3.5 per cent at €27.80.

Financials were under pressure as Merrill Lynch downgraded the panEuropean banking sector to neutral. The US investment bank reaffirmed its underweight stance on the investment/wholesale banks but decided against increasing its weighting in the domestic retail sector because prices were not particularly attractive.

In the international retail sector Merrill said it was concerned about banks with high exposure to emerging markets.

Banking concerns Unicredito fell 2.8 per cent to 5.57 as Merrill replaced it on its core bull stocks list with Banca Intesa.