Stock markets traded nervously yesterday, unsettled by Wall Street's volatility and a continued fall in European bond prices. Many European bourses tracked the Dow Jones Industrial Average as it dipped, rallied and then fell again in early trading.

The Eurobloc 100 dropped 4.02 or 0.4 per cent to 1,039.26, depressed by the steady rise in bond yields. The benchmark German 10-year bond was yielding 4.89 per cent shortly after the close in Frankfurt, compared with 4.87 per cent the previous day and 4.65 per cent a week ago. The Eurotop 100 index of leading shares inside and outside the euro zone declined 13.33 or 0.5 per cent to 2,910.87, while the Eurotop 300 index ended 4.91 or 0.4 per cent lower at 1,271.28.

Frankfurt trimmed its losses as Wall Street opened firmer and the Xetra Dax index finished 21.82 weaker at 5,107.68.

Adidas-Salomon put on 5 or 6 per cent to €89.10 as ABN Amro and Dresdner Bank upgraded the stock in the wake of Monday's first-half earnings, which countered concerns about weakness in the group's order book.

DaimlerChrysler put on 59 cents to €71.10 on a report that its Dasa business may make a joint takeover bid with British Aerospace for Italy's Alenia.

Paris edged down as the three big banks involved in a complex takeover battle fell on concerns that there might be no clear winner when the bid period ends this week. The CAC-40 finished 23.12 or 0.5 per cent down at 4,354.75.

Banque Nationale de Paris, Paribas and Societe Generale all closed lower as optimism that their contest would be resolved this week began to fade. BNP has made hostile bids for both the others in an attempt to prevent them merging.

BNP fell €1.05 or 1.4 per cent to €75.95 on even heavier trade than it experienced on Monday. SocGen tumbled €10.90 or 6.1 per cent to €167.10, while Paribas closed €4.60 or 4.4 per cent down at €99.

Amsterdam posted its lowest close since early April as worries about US interest rates dominated a day of thin trade. The AEX index finished 4.32 or 0.8 per cent lower at 539.93.

Aegon, the insurer, bucked the trend as investors stockpiled shares ahead of a possible buy-back. The shares closed €2.25 or 3.1 per cent up at €75.55.

Milan remained concerned about the outlook for US interest rates and the Mibtel index finished 93 lower at 23,005. Alitalia tumbled 6 per cent to €32.67 on profit-taking after its recent rally, which followed details of its partnership agreement with KLM.