European chemicals stocks were out of sorts after an overnight downgrade from JP Morgan for leading US groups gave investors pause for thought.

The chemicals sector of the FTSE-300 Eurotop indices was among the day's leading losers.

BASF, Europe's largest chemicals group, dropped 4.2 per cent to €45.99, while Degussa-Huels lost 4.7 per cent to €36.20. Drugs and chemicals group Bayer was 1.3 per cent lower at €51.28.

JP Morgan had cut its ratings on DuPont, Dow Chemical and PPG Industries citing valuation concerns and worries of a further deterioration in the global macroeconomic environment. It also downgraded Air Products and Chemicals.

In the food and drinks sector, Nestle took a 3.2 per cent tumble to 3,460 Swiss francs as Lehman Brothers removed the world's largest food group from its recommended portfolio and switched the weighting into the consumer cyclical sector.

But Interbrew picked up 2.6 per cent to €28 as ING Barings and CSFB both began covering of the stock with "hold" and "buy" ratings respectively.

The stock came under heavy pressure when the UK competition authorities insisted that the Belgian brewer must sell its recently acquired Bass beer business. Responding to overnight weakness for US leaders, airline stocks were dull. Air France shed 1.3 per cent at €22.66, Lufthansa 4.4 per cent at €25.90 and KLM 1.2 per cent at €24.30.

Norske Skog fell steeply as planned capacity increases by competitors prompted a radical downgrade of the Norwegian paper group at Handelsbanken Investment.

The bank has shifted from "strong buy" to "sell" on doubts about the durability of newsprint prices. Norske Skog fell 7.1 per cent to 331 Norwegian krone.

Endesa and Iberdrola traded narrowly as the competition court handed its report on the planned merger of the two power generators to the Spanish government.