Fuel Cost concerns, which have dogged airlines since midsummer, sparked a wave of selling yesterday.

Over the past two months, against a backdrop of surging oil prices and fuel cost scares, airlines have, on average, performed about 20 per cent worse than the rest of the market. Yesterday, Lufthansa closed €1.16 lower at €20.70 and Air France down 68 cents at €18.84. KLM shed 40 cents at 19.25.

Technology, media and telecoms (TMT) mostly bounced back, encouraged by the strong opening on US markets. Chip-maker Infineon was up 7.5 per cent to €51.32 after reiterating that it expected record earnings in the fourth quarter, while STMicroelectronics rose 7 per cent to €52.35. Software company SAP was up 6.7 per cent to €241.02 and Siemens was up 6.1 per cent to 147.85.

The telecoms sector was up 4 per cent, with Deutsche Telekom and France Telecom showing healthy gains.

But in the fragile atmosphere, companies with specific problems struggled. Dutch cable company UPC lost another 8 per cent as worries continued about financing and customer complaints. UPC has fallen sharply for the last three days and closed yesterday at a 17-month low of €15.80. In Germany, telecom operator MobilCom fell 7 per cent, although off lows for the day, after the German finance minister said its legal action about mobile phone licences had no chance of success.

Media companies were more mixed, with cable TV broadcaster Canal Plus 5 per cent stronger at €170 and TF1 down 0.7 per cent at €170. Many Internet names, including T-Online, Wanadoo and Terra Networks, slipped again.

Oil companies fell from their highs of Thursday following the escalation of Middle East violence. Total Fina Elf was off 2.9 per cent at €178.10, while Spain's Repsol fell 6.6 per cent to €20.55 on concerns that it may try to bid for power company Iberdrola.

Positive comment from Lehman Brothers helped lift Volkswagen in a mixed motor sector. The broker says the shares, which three months ago bounced off a low of €39, are underpinned by the group's share buy-back plans, strong brands in the US and tightening spending controls. It sees the shares as a good alternative to DaimlerChrysler and has lifted its target price from €52 to €60. Volkswagen jumped €1.65 to €55.30.