Shares in Frankfurt ran into profit-taking after four days of solid gains and the Xetra DAX index ended off 186.78 or 2.6 per cent at 7,072.12. Deutsche Bank fell back following an upward blip for bond yields. Boosted lately by tax reform optimism, Deutsche Bank shed €1.28 at €85.05. Deutsche Telekom faced similar profit-taking with investors locking in recent gains on hopes for an Internet spin-off for the group. The shares ended €3.36 lower at €69.90. Insurers were weak following a downbeat trading statement from Munich Re. Allianz fell €10.10 to €359.23 and Munich Re came off €14.10 at €298.90.

The FTSE Eurobloc 100 index fell 2.5 per cent to 1,348.38 and the FTSE Eurotop 100 index lost 2.3 per cent at 3,527.54. The FTSE Eurotop 300 index came off 2.2 per cent at 1,530.13.

Paris was hit by profit-taking in technology and telecoms. The CAC40 index closed down 169.8 or 2.9 per cent at 5,672.95.

Cap Gemini lost 3.7 per cent to €245.60 and STMicroelectronics 5.8 per cent to finish at €153.90. Utilities conglomerate Vivendi fell 3.5 per cent in heavy turnover to close down €3.30 at €90.10. The stock was off its year high of $96.50 after Vivendi denied it was considering selling its stake in Cegetel, France's second largest mobile phone operator, to Mannesmann. Analysts said the market was still speculating on some sort of alliance.

A wave of big sell orders from an international broker pushed Alcatel down €9.50 to €205.50, a fall of 4.4 per cent. Market sources said sentiment was still sour following rumours the company told analysts to tone down estimates for fourth-quarter earnings, although Alcatel denied this.