Heavy selling in Deutsche Telekom and more signs that US determination to disarm Iraq by force was undimmed sent European shares reeling yesterday to abruptly end a three-session winning streak.
The tech sector was also crumbled as mobile phone giant Nokia dropped four per cent to 13.01 euros after US rival Motorola said it was braced for another drop in handset prices and a slow take-up of video phones.
British insurer Prudential fell 6.9 per cent to 396 pence as talk swirled the group may have to tap shareholders for more cash to shore up solvency levels bashed by a three-year bear market, typifying longstanding sector-wide concerns.
At 1638 GMT, with only Frankfurt still officially trading, the FTSE Eurotop 300 index was down 2.4 per cent at 785 points, with declining issues outpacing advancers by more than six-to-one in moderate volume.
The Eurotop 300 index, which closed last Thursday at its lowest level in six years, had bounced 4.6 per cent by Tuesday's close.
Deutsche Telekom sank on concerns over a possible surfeit of stock after the group unveiled a plan to raise €2.3 billion with a bond convertible into shares to help refinance €64 billion of debt.
"The Deutsche Telekom bond is fairly significant. It's positive for them as it helps to refinance some of their debt, but from a credit rating agency point of view, it makes little difference as convertible bonds are treated like debt," said Clive McDonnell, European strategist at Standard & Poor's.
Telekom shares fell 8.7 per cent to €11.80. France Telecom, also looking to trim its own huge debt pile, shed 5.8 per cent to €22.70.
The DJ Euro Stoxx 50 index dropped three per cent to 2,211 points.
On Wall Street, the Dow Jones industrial average fell 0.78 per cent to 7,978 points, with the Nasdaq Composite off 0.9 per cent at 1,333 points.
Investors took fright as there was no sign that diplomatic rows and anti-war protests would deter US President George W. Bush, backed by British Prime Minister Tony Blair, from attacking Iraq.
Diplomats said the United States and Britain want to draft a short UN resolution authorising military action in hopes for a vote at the end of the month.
"It's very difficult for the market to find any direction. The market has already discounted the probability of war, but is not willing to discount that everything will be fine after a war, and that uncertainty about what comes after is reflected in the market," S&P's McDonnell said.