The profits warning from Lufthansa set alarm bells ringing across the airlines sector.

The German airline expects operating profits this year to fall short of earlier estimates by between 25 per cent and 30 per cent as a result of a pilots' strike and the global economic downturn.

Lufthansa came off 4.5 per cent at €20.25. KLM fell 2.2 per cent to €22.15 and Air France 2.1 per cent at €20.90.

Negative rumblings on profits from the Nordic paper industry sent paper stocks steeply lower. A warning from Finnish papermaker M- real that it was facing a possible second-quarter loss sparked a round of selling in the sector.

UMP-Kymmene fell 3.9 per cent to €35 and Stora Enso came off 3.2 per cent at €12.93.

Hair care group Wella rose 2 per cent to €51 after Deutsche Bank reiterated its "buy" recommendation in the wake of the strong trading update from sector rival Beiersdorf.

Steel stocks, hit lately by negative broker comment, had a steadier session. ThyssenKrupp added 1.5 per cent at €16.39 and Corus gained 4.6 per cent to €1.15.

There was a technical bounce for TMT stocks following Tuesday's big sell-off inspired by Nokia's warning.

Nokia rose 5.8 per cent to €28.06 in spite of downgrades from practically every major broking house. Merrill Lynch cut the stock from "accumulate" to "neutral" and its earnings per share estimate for this year by 20 per cent, as did Morgan Stanley. Goldman Sachs cut earnings per share estimates by 18 per cent for this year and by 26 per cent for next.

Goldmans and Merrill Lynch also downgraded Ericsson. Merrill forecasts a loss of SKr0.85 per share this year instead of SKr0.56. Goldman's view is harsher, forecasting a loss of SKr1.57 per share instead of SKr1.48. Ericsson's shares fell 2.6 per cent to SKr56.

The battered shares of KPN Telecom rose 4.9 per cent to €6.80, although still trading at low levels. They have shed not only everything from last year's bubble but all the gains of the five years before as well.