European stock markets extended their slide in late trade yesterday, as fresh liquidity concerns beset France's Vivendi Universal, whacking its shares to multi-year lows.
Shares in Ericsson also fell heavily and dragged on the tech sector as traders reassessed the telecom equipment maker's financial health in the light of its pending jumbo rights issue and the uncertain economic outlook.
By 1444 GMT, the FTSE Eurotop 300 index of pan-European blue chips had dropped 2.2 per cent but remained some way off the five-year lows hit on July 24, as investors looked ahead nervously to key US data due later in the week after the US central bank hedged its bets on Tuesday.
"The markets have lost confidence in the growth outlook and comments from the Fed overnight suggest they have too, so short-term there are still risks because the data flow could be negative," said Saul Henry, European equity strategist at UBS Warburg.
The narrower DJ Euro Stoxx 50 index, which has shed nearly 30 per cent this year, fell 2.77 per cent.
Trading volumes were low as many market players were away from their desks, due to the August holiday period and the onset of Assumption Day today in many parts of Europe.
Shares in Vivendi resumed trading after a second suspension yesterday as investors punished the media giant after it confirmed it was facing around 5.6 billion euros in refinancing requirements by year-end.
That helped turn the morning's retreat into a rout, as the share price lost around 25 per cent, wiping 13 billion euros of the company's market value.
Vivendi earlier revealed a bigger-than-expected 11 billion euros in goodwill impairment charges alongside its half-year results and saw its credit ratings cut to "junk status" by Standard & Poor's.
The DJ Stoxx technology index was the worst performing sector after Applied Materials warned that its orders could drop as much as 15 per cent in the next quarter.
"Technology stocks are high-beta, meaning they exaggerate the market's movements. When volumes are as low as they are today it only takes a bit of bad news like the Applied Materials warning to send stocks spinning," said one technology analyst in London.
Dutch chip equipment maker ASML dropped 7.9 per cent and compatriot Philips slid 4.7 per cent.
Telecom equipment maker Ericsson was also hit by lingering concerns about its cash outflow, despite its upcoming rights issue.
"Ericsson could have a 53-49 billion (Swedish crown) non-trading related cash outflow, totally eliminating the 28.9 billion (crowns) the company expects to raise from its rights issue and eating into its liquidity pile to support its core trading requirements," said credit analysts at Bear Stearns in a note.
Shares in Ericsson slumped 10.6 per cent, while those in Finnish rival Nokia lost 5.6 per cent.
Elsewhere, Credit Suisse was also among the biggest blue-chip losers, offloading 4.9 per cent of its value after it reported a heavier-than-expected loss for the second quarter.
On Wall Street, the Dow Jones industrial average was 0.5 per cent lower while the tech-heavy Nasdaq Composite was 0.7 per cent firmer.
Big picture worries The Federal Reserve left US interest rates on hold on Tuesday but warned that the economic risks have tilted toward weakness in the world's biggest economy.
Data released showed US business inventories rose by 0.2 per cent in June against expectations of no change, but had little material impact on markets.
However, the more influential industrial production report and Philly Fed survey is due on Thursday, with the University of Michigan survey of consumer sentiment set to follow on Friday.
And with recent data pointing to a recovery slowdown in the world's biggest economy and narrowing the odds of a "double-dip" recession, investors will be hoping for some better news.
"The markets are beginning to price in quite a significant bit of recessionary risk, with US bond yields down to 40 year lows and euro bond yields down to September 11 levels, but we need to see some of the consumer and business confidence surveys at least beginning to form a base," said UBS Warburg's Henry.