Airline stocks remained immersed in gloom. KLM managed to rally but its performance has to be set against a 22.5 per cent slump in the preceding session. Lufthansa and Air France continued to weaken. The immediate selling pressure came from worries about higher fuel prices, lost revenues as a result of the immediate disruption to transatlantic travel, longer-term demand weakness and concern about further terrorist attacks. All of this exacerbates an already tough trading climate.

About a fifth of revenues at KLM, Lufthansa and Air France spring from North Atlantic routes, according to Deutsche Bank. "Our earnings forecasts are clearly going to have to come down again, but we will wait and see the full extent of the crisis," it said.

KLM rose 5 per cent to €10.50. Lufthansa fell 1.5 per cent to €12.80. Air France came off 10.5 per cent to €12 to extend its losses to almost 27 per cent in two days.

LVMH, the luxury goods leader widely linked to airport and aeroplane sales, also continued to slide. Speculation that today's six-month results statement will contain a sales warning hit sentiment hard. The shares came off 5 per cent at €43.08.

The oil sector, pumped up against the broad market trend on Tuesday by surging crude oil prices, after OPEC rushed out contingency plans to stabilise the price of oil. Eni shed 6.3 per cent at €13.36 and Repsol 4.1 per cent at €17.69. Royal Dutch lost 3.8 per cent at €57.90.

Defensive stalwarts were in demand. The search for demand and selling price stability led investors to the utilities sector. Suez gained 8.3 per cent to 35.35. Eon rose 5.8 per cent to €54.75 and RWE 4.4 per cent to €42.40.

Pharmaceuticals put in a strong performance as the sector cashed in on its defensive merits and investors were encouraged by upgrades for the sector from Deutsche Bank and WestLB Panmure. Among WestLB's stock picks, France's Sanofi-Synthelabo gained 1.2 per cent to €71.10 and Denmark's Novo Nordisk jumped 4.9 per cent to DKr340.

Switzerland's Novartis rallied 7.1 per cent to SFr59.25 while France's Aventis put on 7.3 per cent to €73.50. European security companies also rallied on expectations that the US attacks would trigger a surge in demand for high-value security and data protection services.

Sweden's Securitas, the world's biggest security services company, and Assa Abloy, the world's biggest lockmaker, both jumped 13.2 per cent to SKr175.50 and SKr124.50 respectively.

The insurance sector, which led markets down with a 12 per cent fall on Tuesday, put in a steadier performance, in spite of some estimates that companies could face claims of up to $15 billion after Tuesday's attacks in the US.

Munich Re, the world's largest reinsurer, picked up 5.4 per cent to 243, trimming some of Tuesday's 14 per cent losses, as it said liabilities from Tuesday's attacks could amount to about €1 billion and would significantly affect 2001 results. However, it said claims were in line with damages from previous disasters and would pose no threat to its financial stability.

Swiss Re, the number two European reinsurer, recouped 4.4 per cent to SFr132 as it sought to reassure investors, saying it could weather the financial fallout from the attack.