Oil stocks fell steeply in heavy volumes, racking up share price losses in excess of 3.5 per cent as the latest bulge for the weekly energy inventory figures from the US drove crude prices lower.

Talk of production cuts by OPEC before its next meeting in September were brushed aside as commodity traders, concentrating on the slowing US economy and the potential for ever-greater shortfalls in demand for energy, sent crude prices lower.

The big oil stocks had their worst day for months. Royal Dutch ended 3.8 per cent lower at #63.03 in 16.8 million shares traded and Total Fina 4.9 per cent at #151.20.

News that Swissair, just about the worst performing Swiss blue chip this year, was no longer obliged to increase its stake in Sabena, the loss-making Belgian airline, sent the former reaching for the sky.

Swissair and the Belgian government are putting a further and final #430 million into Sabena. As a result Swissair is to cap its equity stake in the Belgian carrier at just short of 50 per cent.

The Swiss carrier's shares, which have come down from a peak this year of 262 Swiss francs on concern about the links with Sabena and other loss-making associate companies, shot ahead from the opening bell.

The stock finished up 16.8 per cent at SFr120, having hit a high for session of SFr124. The shares touched a low of SFr89.85 last month.

Truckmaker MAN, which fell to a fresh low for the year on Tuesday, rebounded as takeover speculation brought the buyers back in some force.

The stock gained 2.8 per cent to #25.45 after a media report fuelled talk that Volkswagen could soon be stalking the company. The report suggested that Allianz, which this week completed the takeover of Dresdner Bank, was in negotiations aimed at selling its 25 per cent stake in MAN as part of a process of focusing more fully on core assets. VW was said to be the front runner as potential buyer of the stake.