US losses and Kosovo air strike fears take toll

Sharp losses on Wall Street dragged an already weak Frankfurt 3.3 per cent lower, pulling the Xetra DAX index back below the 4,900 level. The index closed with a loss of 164.19 at 4,870.49 as the threat of Nato air strikes against Kosovo added to the uncertain mood.

Merger fever provided some early impetus to the telecommunications sector after US cable television operator Comcast agreed to buy MediaOne in a $60 billion (€55 billion) stock and debt deal.

Deutsche Telekom picked up to an early €38.35, with the rise also fuelled by Monday's news that the company had agreed to allow rival Interkom to use its mobile phone network. However, the stock was not immune to the subsequent malaise and the shares closed 15 cents higher at €37.70.

Banks were weak as the merger speculation that drove their rise on Monday ran out of steam. Deutsche Bank fell €2.27 to €49.56, Dresdner Bank gave up €1.45 to €36.15 and Commerzbank lost 70 cents to €27.50.

Paris succumbed to profit-taking in blue chips, dragging the CAC-40 117.5 or 2.8 per cent lower to 4,079.47.

Elf Aquitaine, which had gained around 32 per cent from mid-February levels, fell €5.20 to €120 as investors took profits. France Telecom dropped €3.45 to €75.20.

Amsterdam featured a 4.5 per cent surge in Gucci as continued merger speculation provided impetus to the luxury goods group. The shares closed up €3.30 at €77 in spite of a downgrade from ING Barings shortly before the close.

The broad market, however, went the way of its neighbours with the AEX index finishing 11.59 or 2.1 per cent lower at 532.68. Nedlloyd soared €3.30 or 18.6 per cent to €21, propelled by news that Britain's P&O planned to list its 50 per cent stake in the P&O Nedlloyd container shipping joint venture.

Zurich was a loser as several selling programs added to the pressure on the market. The SMI index gave up 140.0 to 7,013.6.

Milan saw banks hit by profit-taking after the recent take-over euphoria and the real-time Mibtel index finished 395 lower at 24,641.

Banking stocks lost steam after the wave of consolidation that saw UniCredito bid for Banca Commerciale Italiana (BCI) and San Paolo- IMI bid for Banca di Roma. BCI shares, which rallied as much as 3.4 per cent after gains of 4.9 per cent on Monday, ended 0.5 per cent higher at €7.59 having visited negative territory shortly before the close.

Madrid put in a lacklustre performance in response to fears of poor first-quarter results and losses on Wall Street. The general index lost 18.14 or 2.05 per cent at 866.91, with volume staying thin through the day.