After two positive days, many names in the technology, media and telecoms sectors fell back again. Europe's largest business software provider SAP lost more than 6 per cent amid concern on margins and a recent downgrade from ABN Amro.

Chipmakers had a difficult day following Merrill Lynch downgrades on seven US stocks, prompted by a warning of slowing orders from Applied Material, the world's biggest chip equipment maker. Among big European chipmakers, STMicroelectronics fell 3.2 per cent to €52.25 and Infineon was off more than 3 per cent while equipment maker ASM Lithography, also suffering from a downgrade by UBS Warburg, fell 3.8 per cent to €26.99.

German Internet company T-Online fell 2.5 per cent to €19.31, an all-time low, after reports that the telecoms regulator will ban it from receiving bulk discounts for using the phone network of its parent Deutsche Telekom. Other names in the sector were also lower. Spanish rival Terra Networks fell more than 7 per cent to €21.70 and Wanadoo lost 4.8 per cent to €12.95.

Telecoms were also struggling. France Telecom fell 2.8 per cent, Deutsche Telecom 2.4 per cent, Telefonica was off 3 per cent and KPN Telecom 4.4 per cent to €18.64, below the €19 at which new shares are expected to be issued next week.

Spain's fast-food company Telepizza, a former star of the tech surge on hopes for Internet sales, fell 11.2 per cent to €3.24 for a twoday slide of nearly 25 per cent.

The banking sector was under pressure, echoing overnight falls in the US. BNP-Paribas, France's leading bank by market capitalisation, tumbled 5.8 per cent to €93 as disappointment on capital market earnings overshadowed third-quarter results that were in line with expectations. Lehman Brothers reiterated its neutral rating on the stock, with a €90 price target Societe Generale did rather better, adding 3.3 per cent at €66.60. A strong capital market performance enhanced its third-quarter figures which came in above forecasts. Credit Lyonnais dipped 1.1 per cent to €39.78 ahead of nine-month figures after the market closed. Commerzbank dropped 1.9 per cent to €32.78, giving up all of Wednesday's modest gains when nine-month figures beat expectations.

Motor stocks had a bruising session with the uncertainty surrounding DaimlerChrysler. Hit on Wednesday by concern about management changes and reduced earnings forecasts at Merrill Lynch, DaimlerChrysler continued to backtrack.