Europe zapped by Intel

SAP and Orange outllook help Europe to brighter start to session

LONDON, England (CNN) -- European markets ended mixed on Thursday after a early decline on Wall Street, prompted by a downgrade of chip giant Intel, eroded gains by tech stocks.

London's FTSE 100 slipped below the psychological 5,000-point level for the second time in one day, falling 0.6 percent to 4,957.6. The CAC 40 blue chip index in Paris ended up 0.5 percent to 4,098.18 and Frankfurt's electronically traded Xetra Dax was up 0.2 percent to 4,631.56 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, slid 0.6 percent, with the information technology and telecom sub-indices among the big decliners.

A downgrade by investment bank Merrill Lynch of Intel and six other semiconductor stocks sent tech stocks on both sides of the Atlantic tumbling. Merrill also said it expected Intel to lower its outlook for quarterly revenues when it give a financial update after U.S. markets close on Thursday.

SAP (FSAP), Europe's biggest software company, held onto some of its gains to close up 0.5 percent at 110 euros after the German company said late on Wednesday its customers were showing interest in its products but the next six months would be challenging. (Full story)

Swedish telecoms equipment maker Ericsson plunged 5.2 percent to 20.20 crowns after shareholders approved a $3.1 billion rights issue of shares to help the loss-making company through an industry downturn. (Full story)

Rival Nokia, the world's biggest mobile phone maker, fell 3.3 percent to 14.03 euros.

Orange (PORA), Europe's third-largest mobile phone company, closed down 0.7 percent at 5.57 euros -- after notching up earlier gains -- following news that parent France Telecom (PFTE) had bought 103 million shares in Orange worth 950 million euros from German utility E.ON. France Telecom said it would not sell the stock on the market, in view of the current Orange share price. (Full story) France Telecom lost 1 percent to 18.40 euros, also coming off earlier gains.

Meanwhile, Britain's Sage (SGE) ended up 1.2 percent at 169.19 pence -- off its session highs -- and Cap Gemini (PCAP), while Europe's biggest computer services company, rose 1.1 percent to 51.95 euros -- also off its peak.

In Amsterdam the AEX index rose 0.6 percent, while Milan's MIB30 index lost 0.8 percent and the SMI in Zurich fell 0.5 percent.

In the U.S. on Thursday, a Merrill Lynch downgrade of a number of chipmakers, including industry leader Intel, knocked down tech stocks in early trading. On a positive note, an economic report showed the number of Americans filing new claims for unemployment benefits fell below 400,000 last week for the first time since March, declining to 383,000 from a revised 415,000 the previous week. (Full story)

At midday, the Dow Jones industrial average was down 63.2 points, or 0.7 percent, to 9,7933.6, while the tech-laden Nasdaq composite index was down 22.67 points, or 1.4 percent, to 1,572.59.