Europe's technology stocks suffered from the suspension of trading in Marconi of the UK pending a statement.
The IT sector was down 4 per cent as investors held their breath, waiting to hear the worst. The biggest faller was France's Alcatel which, like Marconi, derives much of its revenue from telecom equipment. Its shares fell 7.5 per cent to €22.90.
Alcatel cut its earnings outlooks at the end of May. Last week its chief executive said the group aimed to cut drastically the number of plants it operated by shifting the work to contract manufacturers.
The consumer electronics group Thomson Multimedia, which has less of an overlap with Marconi, was nevertheless also hit. Its shares fell 6.5 per cent to €36.48, while software group Dassault Systemes fell 9.7 per cent to €40.35.
Among other telecom equipment groups, Ericsson fell 6.6 per cent to SKr57 and Nokia fell 4.3 per cent to €25.45. Analysts at Goldman Sachs said Nokia had issued a statement to the SEC in the US showing that its vendor financing strategy "is about to hit its cashflow and balance sheet in a meaningful manner".
The smaller company Highwave Optical, a French optical components maker whose sales come largely from Marconi, fell 12.4 per cent to €7.50.
Another small name, the German group Articon-Integralis which makes internet security software, tumbled 38 per cent to €11.41 after a profit warning. It said second quarter sales would be €52 million, rather than market forecasts of €56 million-€61 million.
The German regulator BaWe launched a preliminary insider trading probe as shares in the company had already fallen 14 per cent on Tuesday before the announcement was made.
Chipmaker Infineon continued heading south, losing 5.9 per cent to a record low of €27.40 as investors looked ahead to the arrival of its 60 million new shares next week. Market participants said a fair price for Infineon's secondary offering would be about 25 per share.
Speculation about the prospects of bid battles in the pipeline made for a lively day in the financial sector. Bank Sarasin, one of Switzerland's largest private banks, jumped 11 per cent to SFr4,775 on speculation that UBS might be considering a link-up or takeover. Analysts estimated that a bid would cost in the region of $2 billion.
Sarasin, which has expanded aggressively in recent years in asset management and private banking, would not comment directly on the market rumours. UBS dipped 1 per cent to SFr254.
Takeover talk was also behind a 3.6 per cent rise in French bank Credit Lyonnais to €45.60. The rumour was spurred by reports that Credit Agricole might list shares as early as November, which would provide cash to pay for Lyonnais.
Newspaper reports that Mediobanca was in merger talks with Italy's second largest bank, UniCredito, sent Italy's premier merchant bank sharply higher.
Banca di Roma was another lively spot in the wake of news late on Tuesday that the group expected a return on equity of about 13 per cent by 2003 and that it would establish a new holding company to "rationalise activities".
The bank also said new management would unveil an updated three-year industrial plan in September. Roma was 1.3 per cent higher at €3.75.
