European blue chips trudged lower yesterday, tugged down by car stocks following a bleak outlook from France's Renault, amid growing anxiety about a possible conflict in Iraq and heightened security concerns.
Insurers were weak as credit rating agency Standard & Poor's cut its ratings on French insurer Axa's debt because of lower earnings growth last year and diminished capital.
Europe's food and beverage sector was also under pressure after British confectionery and soft drinks group Cadbury Schweppes warned of flat 2003 earnings at its US soft drinks unit DPSU.
The overall tone was jittery, with investors fretting about the increasing prospect of a US-led war against Iraq and following a dramatic tightening of security in Britain on fears of an attack by the militant Islamic movement Al Qaeda.
A new taped broadcast by Osama bin Laden exhorting Muslims to fight against a US-led attack on Iraq coupled with news that the US had deployed anti-aircraft missiles around Washington compounded the deepening sense of insecurity.
"With things like tanks at London's Heathrow airport and anti-aircraft missiles around Washington, it becomes a more visible way of crystallising the fears that have been around," said BNP Paribas European equity strategist David Thwaites.
"But there's no sense of panic because there is not the huge volumes. Nobody has any money on the tables in these markets and nobody trusts the rally so when we do get setbacks, the volumes are not all that enormous," Thwaites said.
By 1640 GMT, with only Frankfurt still trading, the FTSE Eurotop 300 index was down 1.7 per cent at 775 points, with decliners eclipsing advancers by about five-to-one.
The narrower DJ Euro Stoxx 50 index lost 2.3 per cent to 2,139 points.
Wall Street offered little support, with the Dow Jones industrial average down 0.5 per cent and the tech-laced Nasdaq Composite falling 0.3 per cent.
Despite the continuing weakness, some fund managers felt the market was poised to rally once the situation in Iraq had been resolved.
"This is the time to think about buying equities. There's no hurry to go in, but it's right to dip your toe in the water. On any valuation basis equities are cheap," said Roger Hornett, chief executive officer and global strategist at Gilissen Securities in London.