Market Report - Europe

A sell-off in banks hit Amsterdam, sending the AEX index reeling 47.38 or 5.3 per cent lower to 848.59.

ING led the sharp falls in the sector, declining 10.50 guilders or 13 per cent to Fl 69.80. Merrill Lynch and Morgan Stanley downgraded the group after it slashed its profit forecast for the current year by almost half.

Other banks were also lower with ABN Amro down Fl 1.40 or 4.7 per cent to Fl 28.70 and Fortis Fl 7.90 or 8 per cent to Fl 89.10.

Zurich was sharply off for a fourth straight day with the SMI index falling 229.6 or 4.2 per cent to close at its low for the year at 5,256.4.

The insurers again bore the brunt of the continuing grief afflicting the financials. UBS, by contrast, opened 24.50 francs higher at Sfr299.50 in response to the news that the chairman, Mr Mathis Cabiallavetta, and three top executives had resigned. The shares closed up Sfr10 at Sfr285. Frankfurt pared some losses late in the session but still finished almost 2 per cent lower as a better day for the banks was outweighed by sharp losses in Daimler-Benz.

The Xetra DAX index ended 75.31 lower at 4,019.31 after hitting an intra-day low for the year of 3,855.04. The banks were mixed after their recent sharp losses. Deutsche Bank rose 2.39 deutschmarks to DM82, Commerzbank DM1.70 at DM42.15 and Dresdner Bank DM2.95 to DM58. HypoVerein sbank gave up DM3.15 to DM112.

SAP fell another DM36 to DM666, extending its loss over the week to 24 per cent. Analysts noted high-tech companies across Europe had been hit by concerns that high-spending banks would seek to save money by slashing IT budgets.

Paris recovered from a 5 per cent intra-day drop to close mixed, with the CAC-40 index finishing 1.13 higher at 3,039.14.

Among financial stocks, Paribas dropped 28 francs to Ffr272 and Societe Generale Ffr44 at Ffr542. Milan closed a volatile day lower with the Mibtel down 146 to 17,733.