On a day of weakness in the drugs sector, Swiss medical products company Sulzer Medica surged 19 per cent to SFr131 after a US judge gave preliminary approval to the settlement of a series of lawsuits. Sulzer has offered $780 million to settle more than 1,000 claims over faulty hip implants that became contaminated with machine oil.

Elsewhere in the sector, share prices lost an average of 1.5 per cent. Aventis was the biggest loser, falling 3.9 per cent to €78.80.

German internet service provider T-Online, an offshoot of Deutsche Telekom, fell almost 10 per cent to on the Neuer Markt as broker downgrades followed Tuesday's first-half results.

French rival Wanadoo fell 3 per cent to €5.25, Italy's Tiscali fell 4.6 per cent to €7.25, and Terra Lycos of Spain fell 4.9 per cent to €7.80.

Deutsche Telekom fell 4.7 per cent to €16.92 and France Telecom fell 5.5 per cent to €36.95. France Telecom grappled with an embarrassing leak of figures for its mobile arm, Orange, which were due out next week. Orange beat expectations with a 102 per cent rise in first-half ebitda earnings and the shares rose 2.9 per cent to €7.57.

Nordic telecoms companies also fell back as the prospect of mergers among them receded. Finland's Sonera fell to another low of €4.80 and Sweden's Telia fell 5.6 per cent to SKr43.50 on reports that it had put its talks with Sonera and TDC of Denmark "on hold indefinitely". TDC closed down 1 per cent at DKr298.

Technology company STMicroelectronics lost 4.3 per cent to €34.27, SAP was down 4.6 per cent to €149.30 and Alcatel fell 7.4 per cent to €17.18.

Swissair went into an abrupt nosedive following six-month results that contained a smaller loss than expected but gave a harrowing account of the extent to which group borrowings are stretched. The shares ended 8.9 per cent lower at SFr99.75.