Weaker European markets continued to toy with nine-month lows yesterday afternoon, pulled down by France Telecom and insurers, as Wall Street turned down amid doubts over the outlook for company profits.
What little cheer there was came courtesy of slightly better than expected US leading indicators data, which rose by 0.4 per cent in May against expectations of a 0.2 per cent rise, following a revised 0.3 per cent dip in April.
"What this shows is that we shouldn't write off the US economic recovery," said economist Mark Wall of Deutsche Bank, pooh-poohing the economic pessimism that has befallen markets since last week's more mixed batch of US consumer data.
At 1426 GMT the FTSE Eurotop 300 index of pan-European blue chips was 1.9 per cent weaker at 1,055 points, just eight points off last week's trough - its lowest level since late September.
The narrower DJ Euro Stoxx 50 index shed two per cent. France Telecom led the blue chip fallers, slumping to all-time lows on concerns of a potential stock overhang as a result of a preliminary creditor deal to bale out estranged German mobile phone partner Mobilcom.
Pressure also mounted on exporters like DaimlerChrysler as the euro climbed to two-year highs of $0.96 against the dollar, eroding their competitiveness at a time when foreign markets are threatened by faultlines in the global economic recovery.
"With the world still banking on impetus from the US growth locomotive, just the slightest tip in the direction of a doubl-dip (recession) could quickly prove problematic for America's trading partners," said a bearish Stephen Roach, Morgan Stanley's influential chief economist in a trading note.
Double-dip or no double-dip, the consensus among strategists is that there was no compelling reason for markets to head higher in the short-term.
"The scale of overinvestment in the boom period was so exceptional, we are now seeing an exceptional correction," said Antwerp-based Gert de Mesure, head of equity strategy at Delta Lloyd Securities.
In New York, the Dow Jones industrial average eased 0.4 per cent while the tech-laden Nasdaq Composite lost one per cent.
The DJ Stoxx technology and telecom sector indices were more or less back to levels last seen in 1997.
France Telecom said it had reached a tentative debt restructuring deal with lenders to its embattled German mobile operating partner MobilCom in return for a security convertible into the French company's shares.
No further details were available and the deal has yet to be signed, but that did not stop shares in France Telecom slumping by 11.3 per cent to new all-time lows.
A bounce in Finland's Nokia, after the world's biggest handset maker cut its sales forecasts but maintained its full-year earnings guidance, was short-lived as gloom once again descended over the depressed tech sector.
Nokia shares yo-yoed either side of breakeven and were 1.8 per cent lower.
Swedish rival Ericsson fared even worse, losing eight per cent as speculation built of further credit ratings cuts.
The chip makers and chip-related stocks were still spooked by Wednesday's news US antitrust officials are investigating the $12 billion global memory chip industry.
German chip maker Infineon Technologies and British chip designer ARM fell between five per cent and six per cent each.
Insurers were also heavily represented on the loser board after Switzerland's second-biggest bank Credit Suisse, down 3.7 per cent, said it had injected capital into its Winterthur insurance unit.
Credit Suisse said it was putting 600 million Swiss francs in fresh capital into Winterthur to reinforce its solvency margin, which had fallen due to weak financial markets.
Swiss compatriot Zurich Financial fell by more than five percent, along with Germany's Allianz, as investors figured that their assets too were being squeezed by the prolonged bear equity market.
Elsewhere, shares in Reuters Group hit a nine-year low, shedding 12.5 per cent as investors interpreted a plan to step up its cost-cutting drive as a sign revenues were under increasing strain.