European blue chips fell for the fifth day running and again veered towards their lowest close in over three months yesterday, led down by French cement firm Lafarge and German chip maker Infineon.
Aluminium maker Pechiney was another big faller as investors reacted to disappointing earnings from North American rival Alcan.
Traders described activity as volatile and the mood uncertain as investors digested a slew of corporate results from US bellwethers such as Citigroup and Ford and mulled the continuing threat of a war in Iraq as well as lingering economic uncertainties.
Strategists added that Europe was witnessing the "darkest hour" that proverbially preceded the dawn, but were still reluctant to pile back into the market, even though they said valuations were increasingly attractive.
"The current quarter will probably be the weakest the European economy will see but we remain cautious because of recent currency movements, because governments are shackled by the amount of fiscal stimulus they can release and because both consumer and investor sentiment remains fragile," said Kevin Gardiner, a European strategistat Credit Suisse First Boston.
By 1641 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index of pan-European blue chips was down 1.0 per cent at 827 points, while the narrower DJ Euro Stoxx 50 index shed 1.14 per cent to 2,325 points.
That left both benchmarks at their weakest level since early October, when Europe's leading shares sank to their lowest in five and a half years.
Trading volumes were average and losses were broad, with declining stocks outpacing risers by about three to one.
On Wall Street, the Dow Jones industrial average fell 0.9 per cent to 8,503, while the tech-laced Nasdaq reversed initial modest gains to fall 0.5 per cent.
Shares in Infineon sank 4.7 per cent after the Chief Executive Ulrich Schumacher of Europe's second-biggest chipmaker kept up his resolutely cautious outlook, arguing that the uncertain development of semiconductor prices meant that it was impossible to give any reliable forecast.
Construction companies including Lafarge and Swiss rival Holcim were dented by weaker-than-expected results overnight from Mexican peer Cemex, the world's third-biggest cement maker.
Lafarge fell 4.1 per cent and Holcim eased 3.6 per cent. Traders said the market was wary ahead of peer Lafarge's 2002 sales, due tomorrow.
Elsewhere, shares in French aluminium maker Pechiney dived 6.0 per cent after the world's No.2 aluminium maker, Alcan, posted fourth-quarter results at the bottom end of expectations, causing investors to fret about its own earnings.