Tyre and cable group Pirelli remained on the rack yesterday. The stock, down steeply on Friday in the wake of dull results, continued to slide as a €7 billion swoop on Olivetti plus news of planned disposals piled on the uncertainty.

By buying (in tandem with the Benetton family) a 23 per cent stake in Olivetti, Pirelli is taking control of Telecom Italia, Italy's fifth biggest telecoms operator. It plans to help finance the deal with asset sales worth €2 billion.

In a frantic session with 92 million shares changing hands, Pirelli fell 16.8 per cent to €2.57 amid a number of broker downgrades. The performance extended losses to 23 per cent in two days.

The deal was widely seen as diluting any takeover premium within the Olivetti share price. The stock fell 15.3 per cent to €1.96.

Leading telecoms operators mostly gained. Deutsche Telekom rose 2.2 per cent to €25.71 in front of today's second-quarter results statement. France Telecom added 4.2 per cent at €52. Boosted by talk that it was close to agreeing a link with Belgacom, KPN added 7.3 per cent at €5.56.

Telecoms equipment shares remained firm. Alcatel rose 3.9 per cent to €19.64. Ericsson, the best-performing share within the FTSE 100 index, jumped 6.8 per cent at SKr55. Nokia gained 3.8 per cent at 24.71.

Sentiment in the technology sector received a boost as internet access and portals company Terra Lycos unveiled second-quarter losses and revenues that came in slightly better than expected. The shares put on 4 per cent to €7.73 as Terra Lycos said rising income from paying clients offset slowing advertising revenues.