Strong financials save the DAX from the worst

Shares in Frankfurt continued to push lower, with the Xetra DAX index falling 84.88 to 6,502.07 - down 6.7 per cent in three days. It would have been even more depressed but for strong financials. Boosted by a fresh outburst of merger speculation and a "no change" interest rate signal from the European Central Bank, financials and, more especially, the banking sector rallied strongly.

Deutsche Bank added €1.75 at €80.25, but the main focus was on Dresdner Bank and HypoVereinsbank following a press report that they were close to a link-up.

Dresdner rose €2.20 at €53.10 and Hypo ended €2.60 higher at €68.20 after hitting a peak for the session of €68.85. Insurer Allianz, which has big stakes in both banks, rose €9 at €325.

Heavy fallers included tech-related stocks and a broad band of industrials. Deutsche Telekom lost €1.75 at €65.25 and Mannesmann €11.40 at €217. SAP tumbled €62 to €518 after Goldman Sachs cut earnings for the software leader.

Paris bore the brunt of investors' disenchantment with tech-related shares, sliding 3.4 per cent or 192.3 to 5,479.70 on the CAC-40 index in active trading volumes.

Cap Gemini, Canal Plus, Equant and ST Microelectronics all tumbled more than 8 per cent as the early showing on Wall Street saw further steep falls for the Nasdaq composite index.

Among market heavyweights, France Telecom gave up €6 at €118 and supermarkets giant Carrefour €8.10 at €163.80. Luxury goods leader LVMH shed €13.60 at €388.40.

Amsterdam fell 9.94 to 632.31 on the AEX index, pushed lower by heavy falls among the heavyweight financials.

Zurich recovered from its lows but still closed 1.2 per cent weaker. The SMI index finished 86.8 lower at 7,181.3.

Helsinki took a drubbing for a second straight day, registering its second-largest one-day drop on record. The Hex index, down 7.5 per cent on Tuesday, fell 1,172.88 or 8.3 per cent to 13,012.04, leaving the market back down at pre-Christmas levels.

Telecom and technology shares continued to lead the retreat. Telecom equipment bellwether Nokia tumbled €8.9 per cent to €158.01, its lowest closing level since December 15th last.

Stockholm dropped 4 per cent before closing early ahead of today's Epiphany holiday, leaving the general index 209.22 lower at 5,058.82.