Technology and telecom companies came under renewed pressure from news from the US. In addition to profit warnings from AT&T and Lucent Technologies, there were also surveys by Morgan Stanley Dean Witter and Merrill Lynch indicating that spending on IT by big US companies would slow next year.
Prices were volatile and many of the big price falls earlier in the day were reversed ads the US markets opened positively.
Deutsche Telekom was down 6.3 per cent to €32.80 in late trade, a low for the year. Mr Ron Sommer, chief executive of Deutsche Telekom, has been briefing analysts over the past couple of days and some of the details are still being digested by the markets. One analyst said Deutsche Telekom was facing a poor fourth quarter in Germany, while its consultancy offshoot Debis Systemhaus may also have been hit by weakness at peers in the US.
Deutsche Telekom's hare price is now below the 33 level at which VoiceStream, its US takeover target, could demand a renegotiation of the deal. But Mr Frank Wellendorf of WestB Panmure said this factor was "just psychological" because the terms only apply in the couple of weeks before the deal is closed, which may be six months away. Even if it was below 33, he believed "the deal will not fail" because VoiceStream sees Deutsche Telekom as an important partner in GSM phone technology.
Dassault Systems made its debut on the blue-chip CAC 40 index in Paris with a 2 per cent drop to 72.55. Dassault, which has said it expects the French government to sell its 16 per cent stake next year, replaces Canal Plus on the CAC.
Internet companies continued to reach record lows. Liberty Surf fell 2.2 per cent to €7.09, its lowest ever price. Salomon Smith Barney initiated coverage of the stock with a "neutral" recommendation and a target of €10.
In Paris, CAI Chevreux raised its recommendation on Pernod saying the Seagram's acquisition was strategically interesting and added strong earnings potential. Pernod's shares rose 2.3 per cent to €70.10.
Among financials, Italian bank Bipop-Carire denied suggestions that it planned to issue profits warning after the shares were hit by a wave of foreign selling. Bipop, suspended at one stage during the session, closed 9 per cent lower at €7.02.
