European markets came off sharply in afternoon trade after the release of figures showing an unexpectedly large rise in US inflation. The FTSE Eurobloc 100 index, which covers leading companies in the euro zone, closed 16.48 or 1.5 per cent lower at 1,054.48. The FTSE Eurotop 100, covering countries inside and outside the zone fell 63.46 or 2.11 per cent to 2,947.19, while the broader FTSE Eurotop 300 settled 26.39 or 2 per cent lower at 1,281.49.

Paris suffered one of the biggest falls in Europe, with the CAC-40 declining from a high of 4,443.30 to end down 92.05 or 2.1 per cent at 4,323.83. Market leader France Telecom rose 5.6 per cent on strong first-quarter sales figures, but it fell sharply later on to close at €71.70, down €2.50 or 3.4 per cent. Bull, the computer group, climbed 76 cents or 8.5 per cent to €9.72 on continued speculation that it would make changes to its share structure. The stock has risen 49 per cent since the close on April 29th.

Frankfurt gave up early gains and the Xetra Dax index closed with a loss of 65.75 or 1.3 per cent at 5,183.49. SAP climbed to an early high of €376.95, clinging to the coat tails of IBM's overnight surge, but by the close, the rise had been cut to €5.50 at €365.50. HypoVereinsbank tumbled €4.20 to €57.80, but thin trade accentuated the fall. RWE jumped €1.38 to €46.98 on a report that the utility planned to restructure to make it Europe's leading energy provider.

Hoechst lost €1.35 to €40 on the continuing uncertainty over its planned merger with France's Rhone-Poulenc.

Amsterdam fell but still ended the best of the main European bourses, with the AEX index finishing €4.69 or 0.8 per cent lower at €552.15.

Financial stocks made a strong start but retreated after publication of the US inflation data. Aegon, the insurer, fell €2.10 or 2.6 per cent to €79.00.

Technology stocks remained strong after a good overnight performance by the semiconductor sector in the US. ASM Lithography, the chip manufacturer, rose €3.55 or 9.7 per cent to €40 after Merrill Lynch's confirmation of its strong buy rating of the stock.

Madrid also lost less than most European markets, with the general index falling from a high of 920.00 to end 7.82 or 0.9 per cent down at 901.86.

Milan drew back on heavy selling of financial stocks. The Mibtel index ended 447 or 1.8 per cent lower at 24,039. INA, the insurer, fell 6 cents or 2.6 per cent to €2.27, while Banca di Roma closed 4 cents or 2.8 per cent lower at €1.41.