European blue chips stretched their losses yesterday afternoon after the Dow fell 100 points at the open, with Ericsson topping the fallers after the share went ex its $3 billion rights issue.

Despite gains over the past two weeks, some strategists remained pessimistic.

"The big story remains unchanged despite sensitivity to individual issues. We are in a correction phase, with the bear market intact," said Robert Crenian, an equity strategist at Dresdner Kleinwort Wasserstein.

At 1352 GMT, the FTSE Eurotop 300 index of pan-European blue chips was 0.75 per cent lower. The narrower DJ Euro Stoxx 50 index was 0.5 per cent weaker.

In New York, the Dow Jones industrial average was down 1.1 per cent and the tech-focused Nasdaq Composite was off 1.4 per cent.

Casting a shadow on Wall Street was news overnight that bankrupt telecoms group WorldCom Inc. had discovered another $3.3 billion in earnings errors, almost doubling the previously disclosed total.

Utilities and insurers led the sectoral gainers in Europe with healthcare and autos leading the fallers, according to the DJ Stoxx series of indices.

Telecoms gear maker Ericsson was the leading individual faller, slipping 4.5 per cent to below the level expected by analysts after the share went ex its massive rights issue, reflecting continued investor doubts over the Swedish firm's prospects. Franco-German pharmaceutical group Aventis, the second largest stock listed in Paris, was down six per cent after saying it had terminated development of an experimental drug for the treatment of high blood pressure.

Drugs groups Novartis and GlaxoSmithKline were down 3.3 and 2.1 per cent respectively in sympathy.

Shares in embattled German financial services provider MLP were up 17 per cent on takeover talk, which failed to dissipate even when the company said it knew nothing about a bid.

The stock was also supported by news investment bank Merrill Lynch initiated coverage of MLP as a "strong buy".