European banking and financial stocks came under the spotlight after the overnight pullback for the sector on Wall Street amid worries about the profits outlook.
Against the trend in Amsterdam, ABN Amro gained 68 cents or 3 per cent to €23.20 as news that the group had summoned its European managers to headquarters raised a wave of speculation.
One recurrent rumour to resurface was that a merger with ING was on the cards. Another was that ABN was about to expand its stake in Banca di Roma. ING eased 20 cents to €63.30 in spite of news that CSFB had raised its price target for the group to €80 from €70.
Germany's Deutsche Bank fell €3.16 to €77.24 and Commerzbank €1.20 to €38.21.
Societe Generale was France's biggest loser, down €3.60 or 5.7 per cent to €59.75.
Frankfurt was lower in thin trade, with investors unwilling to take new positions ahead of the long holiday weekend in the US. The Xetra DAX index finished 40.54 lower at 6,938.33.
Deutsche Telekom picked up from early lows on short-covering ahead of next month's offering of a third tranche of Telekom stock.
The shares finished €1.15 higher at €62.15. Morgan Stanley Dean Witter raised the weighting of telecoms stocks in its European model portfolio from an "underweight" 12 per cent to a "neutral" 16 per cent.
Business software maker SAP slumped €41.70 or 7.1 per cent to €542.80 after an apparently underwhelming presentation to analysts early in the day. The company insisted it had said nothing that could be regarded as disappointing at the meeting.
Paris closed flat with a majority of blue-chip stocks down, particularly in the old economy sectors. The CAC index fell just 0.51 to 6,129.15.
The one bright spot in the picture was telecom stocks which were mostly higher.
France Telecom rose 4.3 per cent to €141.8 as news of its moves to table a bid for Orange next week cheered investors. Telecom equipment maker Alcatel rose 4.7 per cent to €53.30 while Equant continued to bounce back from its pummelling of recent weeks, adding another 7 per cent to €43.85. Bouygues staged a last-minute turnaround and ended 1.8 per cent up at €598.
Zurich losses were aggravated by the sharp falls in its banking sector and the SMI index finished 116.6 or 1.5 per cent down at 7,821.6.
