European blue-chips veered towards five-and-a-half-year closing lows in late trade yesterday as auto stocks like DaimlerChrysler were thumped by adverse broker comment and a looming crisis at Fiat.
Utilities were weighed down by a 14.1 per cent fall in Spanish power company Union Fenosa amid lingering concerns about its financial outlook, including question marks over its accounting practices.
With traders virtually giving up hope of fresh interest rate cuts by the European Central Bank and by the Bank of England today, the overall mood remained bearish going into the third quarter results season, with US Internet bellwether Yahoo! due to report after the close.
"My feeling is that the actual numbers will be OK, but that there'll still be a lack of confidence about where we go from here over the next 6-12 months," said David Thwaites, pan-European equities strategist at BNP Paribas.
"Generally, we're still likely to continue grinding sideways to lower, although at the moment it's looking like its more lower than sideways."
By 1557 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index of pan-European blue chips was well off its session lows but still down 0.8 per cent at 797 points - a level that would mark its lowest close since mid-April 1997.
The large cap DJ Euro Stoxx 50 index shed 1.0 per cent to 2,149 points.
The DJ Stoxx auto index was easily Europe's worst-performing sector, although losses were well-spread, with declining stocks outpacing climbers by around two-to-one.
On Wall Street, the Dow Jones industrial average fell 1.8 per cent, after pessimistic analyst calls on US titans including General Electric and Ford.
The tech-heavy Nasdaq Composite, though, pared its initial losses to trade flat.
German-US car maker DaimlerChrysler slumped for a second session due to a gloomy production outlook in north America.
The stock was Europe's biggest blue-chip faller, shedding 5.6 per cent after Morgan Stanley cut its 2003 earnings forecasts for the group as well as for its two US rivals Ford and General Motors.
Several European car firms that export to the United States were also slammed in Daimler's wake.
Volkswagen sank 6.3 per cent after announcing a longer-than-expected production stop over Christmas to prepare the launch of its new Golf model. BMW dropped 4.2 per cent and France's Renault was off 4.1 per cent.
Italy's loss-making Fiat unveiled plans to place more than 7,000 workers on a long-lasting lay-off scheme and said it would seek state financing for the move, sending its shares down 5.1 per cent.
Shares in Spain's third largest power utility Union Fenosa fell 10.3 per cent on mounting concerns about its financial health.
A report by the US-based research firm Center for Financial Research (CFRA), seen by Reuters, also called into question the company's accounting practices.
French utility Suez fell 4.6 per cent. Elsewhere, British telecoms equipment testing firm Spirent lost about two-thirds of its value after warning on profits.
Also dragging on the DJ Stoxx industrials index was world No.1 wind turbine maker Vestas, which saw its shares slump 11 per cent as the prospects for imminent approval of a US energy bill which supports wind power appeared to fade.
The shares last week rose by more than 10 per cent when a deal seemed imminent. Without a deal, the bill will die when Congress ends this year's session, possibly by mid-October.
A 0.8 per cent rise in retail giant Carrefour left retailers as one of only two firmer sectors.
Investors are hoping the retailer has managed to weather a weaker trend in the sector and achieve organic sales growth of five per cent.
Shares in AstraZeneca added 2.8 two per cent on talk the company had been given accelerated approval to market its new cancer drug Iressa, although the Anglo-SWedish group later said it was still awaiting news from the US Food and Drug Administration.