European stocks sank yesterday, with falls in technology stocks and in Germany's Bayer after its results failed to meet investors' expectations.
Tech shares fell partly on disappointment that earnings at US network equipment giant Cisco Systems failed to top market estimates. The tech slump hit Dutch chip equipment makers ASML and ASMI and top semiconductor makers Philips and Infineon.
"Cisco was obviously a major cause, but today we started heading south before the US. The trigger was just people being scared that the market correction will start sooner than expected," said one German trader.
The DJ European technology sector fell 3.5 per cent, its biggest one-day loss since mid-July. Investor nerves were strung tight as volatility rose on concern about the pace of the global economic recovery and corporate earnings.
Germany's so-called fear barometer, the DAX Volatility index, surged 11 per cent yesterday, bringing its rise this week to 16.6 per cent - the biggest weekly increase since early December.
Germany's Bayer led European decliners with a drop of as much as 8.7 per cent, erasing 1.4 billion euros ($1.6 billion) from its market capitalisation, after an 80-per cent rise in the drug and chemical group's second-quarter operating profit missed expectations.
Rising provisions for bad loans hit Commerzbank, sending shares in the German financial group down as much as 7.21 per cent to 13.13.
By 1558 GMT, with only Germany's DAX still officially trading, the FTSE Eurotop 300 index of pan-European blue chips was down 1.52 per cent at 858 points, while the narrower DJ Euro Stoxx 50 index fell 1.98 per cent to 2,432 points.
The DAX shed 2.71 per cent, London's FTSE 100 closed 1.2 per cent down, Paris' CAC-40 lost 1.93 per cent and the Swiss blue chip index lost 0.96 per cent.
On Wall Street, the Dow Jones industrial average was 0.33 per cent higher at 9,066 points, while the tech-laden Nasdaq Composite fell 1.07 per cent to 1,655 points as Cisco shares slid by more than six per cent.
The earnings season is passing its peak in Europe with results generally in line with expectations, but investors worry profit growth is still largely due to cost-cutting rather than recovering demand.
Investors had pushed the Eurotop 300 up 26 per cent from a six-year low in mid-March in anticipation of an economic recovery, which has yet to feed through into sales.
"We expect some kind of consolidation to take place. The stock market has gone a little bit ahead of economic developments, and investors need more proof of economic recovery," said Lodewijk van der Kroft, a global fund manager at Theodoor Gilissen Bankiers.
Another banking casualty was the Standard Chartered, off 3.19 per cent at 770 pence after the UK bank, which makes about two-thirds of its profit in Asia, warned the environment in its main Hong Kong market continued to be challenging in the short term.
Among the day's other standouts, Novo Nordisk firmed 7.75 per cent to 229.50 Danish crowns.
The Danish pharmaceuticals group reported forecast-beating first-half profits and raised its full-year net profit forecast due to favourable currency hedging.
Elsewhere, Centerpulse was 3.9 per cent lower after Britain's Smith & Nephew said it would not sweeten its bid for the Swiss group, handing victory in the takeover battle to a $3.1 billion bid from Zimmer Holdings.
Smith & Nephew shares jumped 6.47 per cent. And on the mid-cap market, debt-throttled French engineering firm Alstom sagged 6.17 per cent to 2.89 euros after it secured a 3.4 billion euro state-backed financing package that gives the government a 31.5 per cent stake in the firm.
Although the deal staves off default, some investors fear the capital increase will dilute their shareholdings.