Telecoms shares fell steeply after a profit warning from French manufacturer, Alcatel. The group announced it was facing problems in core markets and ended a dramatic day with a decline of 38.4 per cent, or FFr356 at a record low of FFr571.

Frantic selling pushed Alcatel down to FFr523 at one stage, causing trading to be suspended three times. By the close, turnover in the stock was a record FFr5.2bn, more than a quarter of total market turnover.

The reverberations were felt Europe-wide among telecom equipment manufacturers. Germany's Siemens dropped DM10.75 (or 9.6 per cent) to DM101.50, Philips, the Dutch giant, lost Fl 9.70 (8.8 per cent) to Fl 100.70, Finland's Nokia fell FM34 (7.7 per cent) to FM410, Sweden's Ericsson tumbled SKr14.50 (9.1 per cent) to SKr144 and Spain's Amper lost Pta190 (7.1 per cent) to Pta2,500.

Network operators were also hit. France Telecom fell FFr34.80 to FFr425, Deutsche Telekom lost 75 pfg to DM52, Telefonica of Spain gave up Pta210 to Pta5,170 and Portugal Telecom Es520 to Es7,331.

Paris ended 204.0 lower at 3,525.26 on the CAC 40 index after reaching a low of 3,497.70 during the day. Despite this bounce off the bottom, the market remained deeply troubled with manufacturing industry taking most of the pain.Schneider and Largardere both fell more than 10 per cent, tumbling FFr39.90 to FFr288 and FFr23 to FFr192, while Renault came off FFr813 and STMicroelectronics FFr27 at FFr313.

SAP, down 5 per cent on Wednesday on concerns that a profits warning might be on the way, tumbled another DM139 or 14.3 per cent to DM830 as Bank Julius Baer downgraded the stock on the view that second-half results were likely to be worse than first-half figures.

Amsterdam saw declines of more than 6 per cent at Akzo Nobel and Hoogovens and heavy selling among financials. It closed with the AEX index off 39.79 at 987.55.

Madrid was hit by worries over Latin America, and the general index closed down 29.99 at 689.73. A sharp fall in Brazilian shares in early Latin American trading sent stocks with extensive business links with that market tumbling.

Helsinki's Hex index lost 241.44 at 4,137.96 as stocks with Russian links met selling. Raisio, the foods group, fell FM3.50 to FM66.50 and Hartwell lost FM3 to FM84.