Shares in Frankfurt met with profit-taking for the second day running and the Xetra DAX index ended at 5,090.07, down 74.88, and 78 points below the best level of the session.
The main story of the day was found outside the benchmark with Continental, number three in European tyres after Michelin and Pirelli, shooting higher on speculation that the group could be the next producer to forge an alliance. The shares jumped to €26 in early trading, boosted by news of the Goodyear and Sumitomo link. They eventually settled at €24.50 at the close, up 8.1 per cent or €1.85.
HypoVereinsbank, hit lately by rumours of heavy write-downs, rallied on an upgrade to "outperform" by Lehman Brothers. The stock rose €2.14 to €58.63.
Elsewhere in the banking sector, Deutsche Bank eased €1.39 to €47.96 amid talk it was in the running to bid for AIB in spite of currently completing the take-over of Bankers Trust of the US.
MAN continued to gain ground, boosted by merger talk and Tuesday's upgrade from Goldman Sachs. The shares rose €8.97 to €252. Preussag rallied, gaining €3 at €452.
Amsterdam ended 5.67 lower at 527.12 on the AEX index after a session of narrow trading where the main direction appeared to come from the options market. ABN Amro stood out among financials, jumping 75 cents or 4.2 per cent to €18.45 in 20.2 million shares traded. In contrast, Aegon lost €1.90 at €94.80 and ING fell €1.45 to €51.30.
Telecoms leader KPN shed €2.30 at €43.70 and foods and detergents giant Unilever gave up €1.60 at $64.60 for a two-day decline of almost 5 per cent.
Paris stumbled after an early spell in positive territory. The CAC-40 closed 54.73 lower at 4,188.84 amid weakness on Wall Street and uncertainty surrounding US interest rates.
Automobile stocks were hit by fears that restructuring could by-pass the French market. Peugeot shed €10.60, or 7.4 per cent, to €133.60, while Renault lost €2.79 to €43.21.
Zurich edged back during a slow session that saw the SMI index recover from a low of 7,159.2 to close 32.1 easier at 7,193.
Milan drifted into negative territory on a day lacking fresh ideas or a lead from Wall Street. The Mibtel index finished 227 lower at 23,490.
Private sector energy group Edison rallied 65.4 cents to €9.909 as investors decided the shares were looking attractive after their recent declines. Some investors were said to be switching out of AEM, Milan's municipal energy company, although its shares put on 3.6 cents to €2.296.
Madrid shrugged off the gloomy mood to end slightly higher, with the general index up 0.5 to 880.60.
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