Some key European blue chips put on a remarkable spurt in the afternoon, with Nokia ending 7.5 per cent higher and Infineon up more than 6 per cent.

In telecoms, France Telecom ended 7.5 per cent higher at €30.97 and Deutsche Telekom was up 4 per cent at €15.61 in late trade.

Deutsche Telekom's collapsing share price reached a milestone when it temporarily fell below the levels at which it floated in November 1996, €14.30 for retail investors and €14.57 for institutions. Its lowest for the day was €14.16.

At the time, about 2.8 million Germans bought shares in Deutsche Telekom, prompting talk of a new "equity culture", although the German government retains a 43 per cent stake.

Another privatised telecom, KPN of the Netherlands, had its first rise this month as the company replaced Mr Paul Smit, its chief executive, with Mr Ad Scheepbouwer from postal group TPG. The shares were up 10.5 per cent at €2.63.

Sonera was down as much as 9 per cent at one point to touch a record low of €2.80 before closing at €3.10, a fall of 4.9 per cent.

The aerospace group EADS fell 5.4 per cent to €17.14 after a downgrade by Schroder Salomon Smith Barney. It cut its rating from "neutral" to "underperform" and the share price target from €20 to €15.

Financials were hit by concerns over mounting bad debts, the growing threat of recession and shrinking advisory fees. ING, the Dutch-based group, lost 1 per cent to €30.30 after a low of 28.45, while Switzerland's CS Group fell 2.6 per cent to SFr62.20.

The FTSE Eurotop 300 banking sector was 0.5 per cent lower in late afternoon trade. Earlier it nursed a loss of more than 3 per cent and was at its lowest level since late March 2000.

Deutsche Bank lost 1.3 per cent to €65.35 and UBS fell 2.7 per cent to SFr74.65. CrΘdit Lyonnais lost 2.2 per cent to €41.19.