European markets trim losses

Trader at the German stock exchange talks to client as markets decline

LONDON, England (CNN) -- European markets ended lower on Tuesday, but off their lows, as strong U.S. productivity data helped lift investors' sentiment after an earlier sell-off in tech and telecom stocks.

London's FTSE 100 closed down 1.6 percent to 5,119.9 and the CAC 40 blue chip index in Paris ended 1.6 percent lower at 4,296.4, while Frankfurt's electronically traded Xetra Dax was off 0.7 percent to 4,849.03 in late trading (the German market was set to close at 1900 GMT).

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, fell 1.6 percent, led lower by the computer, leisure and steel sub-indices.

European markets plunged at the start of trading on Tuesday after the tech-laden Nasdaq composite index dropped 2 percent to 1,578.48 on Monday -- its worst close since October 8 -- while a big fall by IBM (IBM) decimated the Dow Jones industrial average amid growing doubts about the health of the U.S. economy.

Sentiment turned around in the mid-afternoon after the U.S. government reported a 8.6 percent growth in worker productivity in the first quarter of the year. That was the biggest quarter jump in 19 years. (Full story)

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That report helped the European telecom sector to recoup some of its losses, although many of the big name stocks still ended lower.

Vodafone (VOD), the world's biggest mobile phone company, ended 2.9 percent lower after Goldman Sachs removed from its recommended list. France Telecom (PFTE) lost 3.9 percent, while Orange (ORA), the mobile phone unit of France Telecom, fell 6.6 percent.

Nokia, the world's biggest mobile phone maker, lost 0.4 percent and Swedish rival Ericsson fell 2.2 percent -- both off their sessions.

SAP (FSAP), the world's biggest business software company, dropped 4.2 percent after Microsoft (MSFT) agreed to buy its Danish competitor Navision for $1.3 billion. (Full story) Navision shares soared 11 percent to a high for the year.

Meanwhile, Vivendi Universal (PEX), the world's second-biggest media company, fell 3.2 percent after rating agency Standard & Poor's cut the group's ratings late on Monday to just one notch above junk.

In Amsterdam, the AEX index lost 0.9 percent and Milan's MIB30 index fell 0.6 percent, while the SMI in Zurich dropped 1.4 percent.