Frankfurt turned back after a positive start as gains in Deutsche Telecom were offset by losses in banking issues when investors braced themselves for the fallout from the failure of weekend talks to save builder Philipp Holzmann from insolvency. The Xetra Dax index turned back from a high of 5,998.46 to close 136.08 or 2.3 per cent lower at 5,819.89. The FTSE Eurobloc 100 index lost 17.57 at 1,190.28. The FTSE Eurotop 100 fell 37.44 to 3,270.08, while the broader FTSE Eurotop 300 settled 14.84 lower at 1,406.43.
Deutsche Bank lost €2.55 to €66.40 as it failed to convince other creditors to back a rescue package for Holzmann, the troubled construction group, in which it has a 15 per cent stake. Holzmann shares were suspended as the company said insolvency proceedings would begin today after the marathon talks had failed.
Dresdner Bank tumbled €3.30 to €48.70 on Holzmann worries and its own restructuring plan announced on Friday that envisages heavy commitment to investment banking in the next two years. HypoVereinsbank lost €3.20 to €65.30. The bank ranks second behind Deutsche in Holzmann's list of creditors.
Deutsche Telekom closed €1 lower at €54.30 after a press report said it was poised to launch a bid for Britain's Cable and Wireless. Telekom declined to comment. Mannesmann fell €6.90 to €186.20 on worries that political intervention could derail Vodafone's takeover bid. Thyssen Krupp, by contrast, put on 86 cents to €25.51, extending recent gains on news it planned a restructuring including the flotation of its steel division in 2000.
Paris took a hard knock after its run to a succession of all-time highs. Across-the-board selling dragged the CAC-40 down 115.2 to 5,147.96 after the market had touched another all-time intraday high of 5,304.12. But traders said the CAC-40 could still go higher over the next few sessions. Some attributed part of the slide, which was mirrored in bourses throughout Europe, to concern over soaring oil prices.
Alcatel led the retreat, falling €7.50 to €169, a decline of over 4 per cent. Other heavyweights also suffered. France Telecom, riding high over previous sessions on telecom consolidation talk, fell €3.80 to €109.10. Few sectors were spared. But Alstom, the engineering group, benefited from a technical recovery after its recent under-performance and closed 75 cents higher at €28.25.
Amsterdam ended lower with the AEX index closing 5.61 lower at 601.57, off a high of 610.21. Madrid was hit by losses in telecom heavyweight Telefonica, and the general index dropped 14.08 to 933.14. Milan closed lower as investors took profits on telecoms stocks which had reached four-month highs. Sharp declines in banks also helped to pull the market lower.
