European markets pared their sharp losses in late trade yesterday, as shares in Deutsche Telekom surged on growing hopes that the indebted telco's embattled chief might step down.
But sentiment was fragile and benchmark indices were near nine-month lows, after traders gave only a cautious welcome to a speech by US President George W. Bush aimed at addressing the market's chronic accounting concerns.
While welcoming the speed with which the White House was set on reforming how firms presented themselves to investors and on bringing rogue companies to order, strategists doubted whether policymakers could quickly resolve the market's ongoing crisis of confidence after a series of accounting scares.
"What policymakers won't bring to a quick end is the lack of confidence investors have in Corporate USA. That has been damaged to the extent that it's going to take a long time to recover," said Jamie Lewin, market economist for British fund management group Gartmore Investment Management.
By 1618 GMT, with only Frankfurt still trading, the FTSE Eurotop 300 index of European blue chips was off 1.1 per cent, in a broad sell-off led by tech and telecom stocks.
The large cap DJ Euro Stoxx 50 index lost 1.3 per cent. Fallers outnumbered risers by more than eight-to-one.
At the close in Paris, Alcatel shed 2.2 per cent having earlier been down more than double that after Moody's Investors Service cut the French group's credit rating to "junk" status and warned of further possible cuts.
Meanwhile, Deutsche Telekom stood out among the few climbers, surging 6.6 per cent in heavy volume, having shed more than 45 per cent in the year-to-date prior to Tuesday's move.
Sources told Reuters a powerful panel steering Deutsche Telekom's supervisory board was due to meet Tuesday to discuss whether Chief Executive Ron Sommer, blamed for the stock's slide over the last year, should stay.
In New York, benchmark indices traded both sides of breakeven before heading lower after dour outlooks from software groups Citrix Systems and Retek.
That weighed on Europe's No.1 software group SAP, which lost 4.4 per cent, and British accounting software maker Sage, which fell eight per cent.
Telefonica was the latest company caught up in accounting maelstrom after the Spanish telecoms flagship said it made a loss of 7.2 billion euros ($7.1 billion) under US accounting rules versus a 2.1 billion euro profit in Spain.
Telefonica attributed the discrepancy to the way in which goodwill is accounted for under US standards, but its shares still fell 3.2 per cent.
But some analysts played down the significance of recent accounting worries, which have also ensnared US drugs group Merck and French media giant Vivendi Universal in recent weeks.
The French regulator announced after the close that it would conduct a review of Vivendi's accounts.
"These accounting concerns are a little bit overdone. We are more worried about the economic situation, whether we might see a double-dip (recession), and about valuations and whether the earnings growth assumed is obtainable," said Pia Hellbach of Union Investment GMBH in Frankfurt, Germany's third-largest mutual fund with 55 billion euros under management.
German technology and engineering giant Siemens dipped 4.7 per cent to 59.6 euros after investment bank Lehman Brothers cut its price target on the stock to 50 euros from 60.
Meanwhile, traders attributed a 3.4 per cent dip in the shares of mobile phone giant Vodafone to a 28 per cent year-on-year slump in Japanese mobile phone shipments.
Shipments fell in May for a 12th month in the latest indication that the once vibrant sector has burst its bubble.
Vodafone has exposure to the Japanese market through its J-Phone unit, but other mobile telcos were also hit, such as France Telecom-owned Orange, Spain's Telefonica Moviles, and UK rival mmO2.
UK insurers fell as investors continued to digest the fallout of a review of the domestic savings industry, which could further eat into insurers' profits while potentially bringing in more business, dealers said.
Shares in Aviva (formerly CGNU) shed 3.9 per cent, Prudential lost 3.7 per cent.
Earlier, eurostocks were pulled off morning lows by Germany's ZEW institute - widely regarded as a precursor to the closely-watched Ifo survey - which reported a 0.5 point decline in its July economic expectations index of analysts and investors to 69.1, above expectations.