A profits warning from BASF, Europe's largest chemicals group, sent shock waves through the sector. The surprise announcement came as an unwelcome reminder that the old economy was not immune from the world economic slowdown.

Other leading European chemicals groups rushed out statements, distancing themselves from BASF's predicament.

However, the reassurance was not enough to save the sector from a downward lurch. The FTSE Eurotop chemicals sector was the biggest loser of the day, down 2.5 per cent in late afternoon trade.

BASF shares, long regarded as blue-chip defensives, dropped 2.1 per cent to #43.78, their lowest close since early April.

Bayer was another hefty casualty, losing 4.3 per cent to #43.69, as the group said it would comment on its profits outlook for 2001 in coming days. Akzo Nobel lost 3.1 per cent to #47.35. The Dutch group said it was adhering to expectations that its 2001 profit would be near the 2000 level. However, it did not rule out a downward adjustment, perhaps when it releases second-quarter figures on July 25th. DSM, which also stayed with its current outlook, lost 2.4 per cent to #40.

Among other losing chemicals groups, Air Liquide fell 1.9 per cent to #159, Ciba 1.6 per cent to 106 Swiss francs (#69.71), Degussa 2 per cent to #32.24 and Solvay 0.9 per cent to #57.25.

Glimmers of hope helped share prices in the telecommunications sector. KPN Telecom rose 6.4 per cent to #6.12, its first decent rise for three weeks, after it confirmed it was in talks with Belgium's national carrier Belgacom. Deutsche Telekom rose 4.1 per cent to #25.26 after it announced a deal to dispose of non-core assets. Sonera rose 4 per cent to #9.65 after announcing it had scrapped its plans to list its Internet portal Sonera Plaza.

Telecoms equipment maker Ericsson rose 1.9 per cent to #53.50 after saying its mobile phone unit was on track to return to profit by the fourth quarter. Earlier this year Ericsson outsourced mobile phone production to Singapore-based Flextronics to help cut losses.