Europe ends week at 8-month lows

Investors cash in chips as U.S. recovery stumbles and companies issue warnings

LONDON, England (CNN) -- European markets closed at new eight-month lows on Friday with investors bailing out of a wide spectrum of stocks and economic as corporate sentiment soured.

After punishing tech and telecom sectors for most of the session -- prompted by growing concerns over sales and earnings prospects -- investors turned their backs on other sectors as well, as U.S. data pointed to a weaker-than-expected economic recovery.

London's FTSE 100 fell 3 percent to 4,630.8 and the CAC 40 blue chip index in Paris dropped 2.9 percent to 3,843.07, while Frankfurt's electronically traded Xetra Dax was down 3 percent to 4,334.84 in late trading (the German markets were set to close at 1900 GMT).

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, fell 2.5 percent to 1,064.86 -- the lowest level since September last year -- with tech and telecom stocks at five-year lows, with other major sectors slumping to their lowest levels of 2002.

"Today has been different from the past few weeks as we have seen real capitulation in the market as every stock and every sector is down," Khuram Chaudhry, a European strategist at Merrill Lynch, told Reuters.

QUICKVOTE How long will European markets take to recover? Six months Twelve months More than a year View Results

"Up until now, people have been asking when will the market bottom out, but now people are getting fearful and sentiment is becoming extreme."

The European sell-off began after U.S. telecom equipment maker Lucent (LU) warned of a sharp fall in third quarter revenue, (Full story) while tumbling U.S. retail sales pointed to cracks in the world's biggest economy's fragile recovery. (Full story)

Investors were also jarred by software maker Adobe (ADBE), which cut its revenue outlook, and long-distance carrier Sprint (FON), which lowered its growth forecast for its wireless unit.

But the final push came from the closely watched University of Michigan's consumer sentiment survey, showing a bigger than expected slide in confidence in June. (Full story)

That triggered more selling of tech and telecom stocks, and quickly spread to other sectors -- with the hardest hit being media and automobile stocks.

France Telecom (FTE) dropped 6.76 to 15.85 euros after reports that it was ready to sign a key refinancing agreement with creditor banks of its German affiliate MobilCom on Monday, fuelling hopes for a rescue plan for the stricken German company. (Full story)

Vodafone (VOD), Europe's biggest mobile phone operator, slid 3.7 percent to 89.97 pence. The company said that its Japanese unit J-Phone had raised subsidies on about half of the handsets in the Japanese market due to stiff competition.

ARM Holdings (ARM), Europe's biggest chip designer, fell 4.3 percent to 154.25 pence. Europe's biggest chipmaker STMicroelectronics (PSTM) edged up 0.2 percent to 23.54 euros and rival Infineon Technologies (FIFX) lost 3 percent to 15.43 euros.

Adobe's cut in its sales forecast hit SAP (FSAP), Europe's biggest business software maker, which saw its shares fall 5 percent to 9.03 euros in late Frankfurt trading. On Friday, the company said it was considering pulling out of Germany's Neuer Markt because of the tarnished image of the tech index.

Cap Gemini (PCAP), Europe's biggest computer services group, which earlier in the session plunged more than 10 percent to an all-time low of 42.70 euros, recovered slightly to end down 4.6 percent at 45.30 euros.

On Friday, investment banks Goldman Sachs and Merrill Lynch cut their price targets on the company's stock. Merrill told its clients to "sell" the stock and lowered its price target on the company's stock to 36 euros. It also said Cap Gemini needed to fire more than 5,000 to meet earnings estimates. (Full story)

Alcatel (PCGE), France's biggest telecom equipment maker, fell 3.3 percent to 9.83 euros.

However, Nokia, the world's biggest mobile phone maker, recovered its huge session losses to end up 0.2 percent to 13.15 euros while Swedish rival Ericsson jumped 4 percent to 18 crowns, recouping its earlier losses as well.

Vivendi Universal (VEX), Europe's biggest media company, fell 4.2 percent to 27.88 euros after it said it had agreed to sell its stake in TV arm Canal Digital to Norway's Telenor for 2.15 billion crowns ($274 million, 290 million euros) to settle a year-long dispute. (Full story)

Anglo-Dutch steel group Corus (COR) plunged 13.8 percent to 77 pence on speculation that it would issue a profit warning. The company declined to comment on the rumour.

In Amsterdam the AEX fell 2.7 percent and the SMI in Zurich lost 1.2 percent, while Milan's MIB30 was down 1.9 percent.