Europe's markets ended a traumatic week with further falls. Paris fell below 4,000 on the benchmark CAC index for the first time since February 1999, losing 5 per cent, while Frankfurt fell more than 5 per cent.

The sectors worst hit were the same as earlier in the week airlines, insurers, hotels and luxury goods. Techs and telecommunications shared in the losses; even oils failed to rally. A fourth consecutive day of disruption to flights kept intense pressure on the airline sector.

Germany's Lufthansa, which cancelled all 25 of its flights to the US yesterday, tumbled another 10.5 per cent to €11.20, taking its losses since Monday's close to 33 per cent. The latest fall took the shares to their lowest level since April 1997.

Alitalia, which had a flight to New York from Rome turned back on Thursday due to a fresh closure of airspace in the US, dropped 9 per cent to 71 cents. JP Morgan cut its rating on the stock, forecasting a sharp deterioration in profits.

Air France, which banned passengers from taking knives on to any of its flights and introduced further security measures, fell 10.4 per cent to 10.98. Carmakers also nursed further losses amid concerns over flagging demand in the US.

Luxury manufacturer BMW dropped 10.2 per cent to a 17-month low of €27.87 while Volkswagen dropped 6.9 per cent to €40.45 and DaimlerChrysler lost 10 per cent to €34.42. The trio had been looking for strong exports this year, particularly into the US market, to offset weak domestic demand.

Reinsurers suffered further losses with Munich Re down 4.7 per cent to €243.63 and Swiss Re losing 4.5 per cent to €139.50.

Swiss-Swedish engineering group ABB fell 8.4 per cent to SFr13.05 as it banned its 140,000 staff worldwide from traveling top areas that could become the target of US retaliation.

In luxury goods, LVMH fell 7 per cent to €37.96adding to the hefty 19 per cent fall of the previous session and bringing it to its lowest level since March 1999. On Thursday night it posted a 15 per cent drop in first-half net profit. Morgan Stanley cut its earnings per share forecast by 9 per cent to 1.30. Fellow luxury goods group Richemont, South African-based but listed in Switzerland, fell 12.1 per cent to SFr2,980.

The European oil sector has fallen about 8 per cent since Tuesday. Yesterday Total Fina Elf lost 4.3 per cent to €148.20 and Repsol YPF fell 2.3 per cent to €17.18.

Deutsche Bank said: "We retain our overweight in energy, as oil stocks continue to discount significantly lower oil prices. While weaker economic growth could put downward pressure on oil prices, sustained tension in the Middle East may well offset this."

In leisure, French hotel group Accor kept falling, reaching its lowest for more than four years. The shares closed at €27.55, a loss of 9.2 per cent. Travel group Preussag fell 3.6 per cent to $26.59. In telecoms, Olivetti was halted limit down after falling 9 per cent. It closed at €1.02. Telecom groups continued seeking ways of cutting the cost of 3G, the new technology for mobile phones. Yesterday KPN got together with Telefonica Moviles and Sonera to share costs of building a German 3G network. It follows a similar move in June by BT and Deutsche Telekom.

The moves did little to lift sentiment. KPN fell 13.6 per cent to €2.73, Telefonica fell 7.25 per cent to €10.11 and Sonera fell 6.5 per cent to €3.04.

Goldman Sachs, in a research note on telecoms, picked out Deutsche Telekom for its "compelling valuation" and "improving visibility". he shares yesterday became even more compelling, falling 4 per cent to €14.88.