European shares were mired in a morass of negative sentiment yesterday as mobile phone makers Nokia and Ericsson led yet another technology sector assault, pushing benchmark indices to the brink of eight-month lows.
The US dollar's fall to fresh 17-month lows against the euro and fresh losses on Wall Street soured the mood further in Europe, where shares in 48 of the region's 50 biggest companies fell.
"It's mainly sentiment that is ruling any movement. We just don't seem to have enough faith and good news to fuel the market into positive territory at the moment," said Florian van Laar, a fund manager at Eureffect Asset Management.
By 1620 GMT, the FTSE Eurotop 300 index was down 2.3 per cent, close to an eight-month low registered last week, as decliners beat advancers by about five-to-one.
The narrower Euro Stoxx 50 index of euro zone blue chips shed 2.9 per cent.
In New York, the Dow Jones industrial average fell 0.4 per cent as the Nasdaq composite eased 1.2 per cent after sentiment was soured by the reported arrest of the former chief executive of biotechnology company ImClone.
Even an upbeat outlook from the world's second biggest mobile phone manufacturer Motorola did little to lift sentiment.
The US company said it would meet or beat its guidance for the second quarter and remained on track to return to profitability in the third quarter and show a profit for the full year.
The news came after rival Nokia, the world's largest maker of cell phones, warned on Tuesday that its sales would fall in the second quarter in the face of weak demand for handsets and network equipment.
"The news from Motorola has basically been cancelled out by what we heard from Nokia before," van Laar said.
Nokia was one of Europe's biggest losers yesterday, shedding 6.9 per cent on renewed concern about the tech sector's outlook.
The DJ Stoxx European technology index was the biggest loser as Nokia and Ericsson fell, tumbling 5.2 per cent and adding to losses of almost 42 per cent so far this year.
Nokia was also dented by investment banks Morgan Stanley and Schroder Salomon Smith Barney cutting their target prices for the company and lowering earnings estimates, blaming the risk of further negative newsflow for the telecoms sector.
Telecom equipment stocks were also dogged by fears that the embattled German group MobilCom might seek bankruptcy protection.
Telecom operator France Telecom yesterday ended a cooperation pact with the German firm. The heavily-indebted French group said it would now only cough up limited financial support for its cash-strapped affiliate, whose shares fell 15.6 per cent yesterday extending a 35 per cent slide on Tuesday.
France Telecom was down 5.5 per cent.
Drug stocks fell to their lowest level in more than two years as a series of setbacks at individual firms and concerns about generic competition to top medicines hit the sector.
Traditionally a safe haven in troubled equity markets, pharmaceuticals have lost their lustre following a string of profit warnings from leading companies, reflecting patent threats, weak R&D productivity and mounting pressure on prices.
The continent's three biggest drugmakers - GlaxoSmithKline, AstraZeneca and Novartis - lost between 0.5 to 4.6 per cent, matching heavy losses on Wall Street on Tuesday.
Elsewhere, shares in Credit Suisse Group shed 3.6 per cent after the Swiss bank said it was cutting another 500 jobs due to shaky financial markets.