Shares in German pharmaceuticals and chemicals group Bayer shares rose as much as 4 per cent on talk that Roche might bid for Bayer's pharmaceuticals division. After a firm denial from Roche, Bayer's shares fell back and ended the day 1.7 per cent higher at €35.70, while Roche ended 1.6 per cent down at SFr122.75.

After Bayer withdrew its anti-cholesterol drug Baycol this month it said it may have to restructure, although it did not say it would sell the pharma side. But Bayer is one of the last conglomerate groups in the sector, and Roche is thought to have made one offer already last year.

The telecommunications sector was pressured by poor sentiment stemming from the US. Sonera fell 3.6 per cent back to its all-time closing low of €5.15, France Telecom lost 3.3 per cent to €38.63 and Telefonica fell 3.3 per cent to €12.87.

Deutsche Telekom, which presented first-half results, fell 3.5 per cent to €17.43. It reported core EBITDA (earnings before interest, tax, depreciation and amortisation), excluding one-offs, up 12 per cent to €7.2 billion but net earnings were minus €349 million. Its shares fell last week to a 2 1/2-year low and are still only a scant amount above their €14.30 flotation price of 1996.

One exception in telecoms was the Dutch KPN, which rose 6 per cent to €4.24 amid news that it was in the final stages of merger talks with Belgacom.

Things looked bleak in technology stocks too. The IT sector lost around 3 per cent, with Nokia down 3.3 per cent at €18.45, Alcatel down 4.9 per cent at €18.15 and ASML, the chip equipment maker, down 7 per cent to €21.76.

Media stocks came off a little lighter, although cable company UPC fell 18 per cent to €0.49 following confirmation of a delay on the merger of its German cable assets with those of Primacom.