Europe's technology shares were hit by Nortel's news on Tuesday night that it would make a loss of $3.6 billion in the third quarter. However, morning losses were drastically reduced by the afternoon as stocks took fresh heart from a positive start on the US markets.

The most direct victim was French-based telecommunications equipment group Alcatel, which like Nortel is big in fibre optic cables.

Alcatel shares, already at a historic low, fell 7.6 per cent to €11.60. Alcatel yesterday said it planned to cut about a third of its staff globally in the fibre optics and undersea cable divisions - more than 3,000 people. Earlier this year it announced 20,000 cuts among permanent and contract staff.

Another victim was Germany's Siemens, which also has high exposure to telecoms equipment, accounting for about a quarter of its sales. Its shares fell 2.5 per cent to €40.35, although well up from their worst of the day. Nokia fell 2.7 per cent to €16.61 and Ericsson was off 0.5 per cent to SKr36.20.

Media stocks continued to slide as downgrades from brokerages followed the profit warnings of earlier in the week. Havas Advertising was cut from "buy" to "hold" by Credit Suisse First Boston. ABN Amro cut Havas's earnings per share forecast by 33 per cent for 2001 and 22 per cent for 2002. Havas trimmed its losses in late trade to end just 0.9 per cent lower at €5.64 but rival Publicis fell 6.3 per cent to €16.16. News Corp and Viacom twisted the knife for media stocks with statements that they were expecting lower advertising revenues following the September 11th attacks. Publisher VNU fell 3.1 per cent to €26.16, Elsevier fell 2 per cent to €11.66 and French broadcaster TF1 fell 3.1 per cent to €19.10.

Bouygues, the construction-to-telecoms group that has a stake in TF1, fell 6.6 per cent to €27.60. Its telecoms sector peer Equant, which provides network services for airlines, fell 12.2 per cent to €8.46.