Frankfurt bounced gently off the bottom late in the session to close with the Xetra Dax index down 73.16 or 1.5 per cent at 4,797.33 after a session low of 4,749.90.
Banks were mixed following Commerzbank's forecast of significantly lower risk provisions this year. Deutsche Bank retreated 37 cents at €49.19 and Commerzbank 57 cents at €26.93. Dresdner added 40 cents at €36.55
Mobilcom continued to wilt in the Neuer Markt, the market specialising in smaller high-tech shares. The stock fell to its lowest level for four months, slipping €32.50 or 13 per cent to €226.50. Elsewhere in the telecommunications sector, Deutsche Telekom shed 97 cents to €36.73 and Mannesmann €2.95 at €110.65.
Paris staged a late recovery and the CAC-40 index closed down 21.31 at 4,058.16 after touching a low for the session of 3,995.70. Dexia was top performer, jumping €8.20 or 7 per cent to €126. Good earnings and positive forecasts prompted a series of broker upgrades, with Societe Generale setting a price target of €140.
LVMH rose €6.80 to €242 as it announced plans to bid for Gucci. Analysts said LVMH was a better strategic fit than Pinault-Printemps which last week acquired a 40 per cent stake in Gucci. Shares in Pinault-Printemps lost 60 cents at €139.80.
Merger partners Societe Generale and Paribas outperformed following their pledge to more than double the value of the combined entity.
Paribas was up 60 cents at €101.50, while SocGen held steady at €171.
Amsterdam suffered heavy selling of blue chips with Royal Dutch, Unilever, Philips and ABN Amro all under-performing the broad market which ended 6.95 or 1.3 per cent lower at 525.73 on the AEX index.
A broker downgrade and adverse talk of a US take-over combined to send Unilever lower. Lehman Brothers cut its rating from buy to neutral and the shares fell €1.60 to €63.50.
Philips lost €1.40 at €71.15 while Royal Dutch shed 90 cents at €47.10 in spite of a further bounce for international oil prices with Brent Blend flirting with $14 a barrel.
Milan finished off its lows but more than 1 per cent weaker with the Mibtel index 296 down at 24,345. Telecom Italia was one of the few Mib30 stocks to end in positive territory, lifted by fresh hopes that Olivetti's bid for the telecoms group could succeed. Telecom Italia put on 3.4 per cent to €9.34 while Olivetti eased 1.7 per cent to €2.76. Madrid put in a dull performance, with the general index closing down €3.63 at €864.28. Telepizza was a rare firm feature, jumping 40 cents to €7.55 on rumours over an imminent merger.
