Frankfurt Dax: German shares put in a lacklustre performance after setting new records earlier in the week, and further profit-taking is expected. Share prices were dragged lower by the weaker opening session on Wall Street and dealers expect the New York market to suffer more profit-taking today, a pattern that will filter through to European markets.

Motor shares dropped despite a report from the German Automobile Industry Association which showed first-quarter output in the industry up 8 per cent to 1.35 million units. Volkswagen fell DM35 to DM1,453 while BMW was down DM38 at DM2,040. Software group SAP preference shares, which had bucked the downward trend in early trading, closed DM13 lower on DM884.

Paris CAC-40: French shares closed sharply lower despite a recovery by the dollar. Heavy falls in London, New York and Frankfurt and jitters ahead of today's meeting of the Bundesbank council provided the excuses for investors to resume the consolidation trend begun last week.

"There has been a fall despite the rise in the dollar. The market wants to consolidate and we should hit 3750 on the CAC rapidly," said one broker. Another said that despite Wednesday's record level on Wall Street, stable long-term interest rates and a recovery by the dollar and oil prices, the CAC broke below an important chart point at 3850.

Milan Mibtel: Italian shares closed weaker across the board, laid low by a sharp fall in stock index futures and weakness on Wall Street, in a day of frenetic trading in bank stocks after Credito Italiano's merger with Unicredito. The June stock index contract was down over 4 per cent and indicates some near-term weakness for the stock market.

Credito Italiano surged on the merger news and closed up over 9 per cent, but still well off its earlier high point. Brokers expect some profit-taking in the stock today. In contrast, Mediobanca shares plunged over 6 per cent as the market pondered the implications of the merger for Mediobanca.