Techs batter European markets

LONDON, England (CNN) -- European markets ended down on Wednesday, despite reclaiming some earlier losses, as a weak start on Wall Street kept tech stocks under pressure after warnings from U.S. sector rivals.

London's FTSE 100 slipped 1.1 percent to 4,652.4 and the CAC 40 blue chip index in Paris dropped 1.7 percent to 3,935.58, while Frankfurt's electronically traded Xetra Dax was down 1 percent to 4,388.92 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, with the information technology, insurance and banks sub-sectors leading declines.

"European equities are undervalued but not undervalued enough to justify sharp recovery in price," Michael O'Sullivan, pan-European equities strategist at Commerzbank, told Reuters.

Technology and telecom stocks, which plunged on Tuesday, renewed their downward spiral on Wednesday after chipmaker AMD and Apple Computer issued warnings.

AMD, a U.S. chipmaker, lowered its sales forecast and said it faces a substantial operating loss in the second quarter because of broad weakness in the personal computer market that cut into the chipmaker's business. (Full story)

Apple Computer warned sales and profit in the quarter ending this month would fall short of forecasts as the slowdown in new computer spending proves persistent. (Full story)

U.S. software giant Oracle (ORCL) posted earnings in line with expectations but CEO Larry Ellison told CNN he was unsure when global tech spending would rebound. (Full story).

Ellison's comments were enough to send software stocks across the continent tumbling. Britain's Logica (LOG) fell 2.6 percent and Sage (SGE) lost 1.7 percent, while France's Dassault Systemes slipped 1.1 percent -- but off its lows for the session. Germany's SAP (FSAP), Europe's biggest software maker, was down about 2 percent in late Frankfurt trading.

European chips stocks followed AMD's decline. Germany's Infineon Technologies (FIFX) was down 4.3 percent in late trading, while its biggest European rival STMicroelectronics (PSTM) lost 1.5 percent and Philips Electronics, the region's third-biggest chipmaker, dropped 3.1 percent. All three chipmakers were off their lows for the session.

ARM Holdings (ARM), Europe's biggest chip designer, fell 5.4 percent to 141.50 pence -- also off its lows -- and one of the world's biggest suppliers of chip making equipment ASML fell 5.6 percent to 15.90 euros.

In the telecom sector, Nokia, the world's biggest mobile phone maker, fell 4.1 percent to 13.49 euros, while Swedish rival Ericsson lost 1.2 percent to 17.10 crowns. French telecom equipment maker Alcatel (PCGE) dropped 6.3 percent to 9.46 euros.

Vodafone (VOD), the world's biggest mobile phone operator, ended down 0.8 percent to 92.50 pence -- after falling more than 4 percent in the session. On Wednesday, the company said Chief Executive Chris Gent received 2.42 million pounds ($3.6 million) even though the company racked up Britain's biggest ever loss. (Full story)

France Telecom (FTE) dropped 8 percent to 15 euros and Deutsche Telekom (FDTE) was down 3.2 percent to 10.02 euros in late Frankfurt trading.

Shares in most European airlines fell on Wednesday after a strike by air traffic controllers grounded flights in major centres. (Full story)

Air France (PAF), Europe's third largest airline, was the hardest hit by the one-day strike which forced it to ground 90 percent of its flights. Its shares lost 1.9 percent to 16.04 euros in early Paris trading.

No.1 European carrier British Airways (BAY), which cancelled most of its flights to the strike-bound airports, slipped 1.9 percent to 197.50 pence. UK discount carrier easyJet (EZJ) lost 9 percent to 349.50 pence, while rival Ryanair (RYA) fell 6.2 percent to 400.22 pence in London.

Italian carrier Alitalia fell 3.3 percent to 0.68 euros. The European Commission approved on Wednesday a 1.4 billion euro capital increase in Italian state-controlled airline Alitalia and 129 million euros in state aid. (Full story)

Germany's Lufthansa (FLHA), Europe's second biggest airline, was down 0.4 percent at around 14 euros in late Frankfurt trading. On Wednesday, Chief Executive Juergen Weber expects Europe's second-largest airline to make an operating profit of 400 million euros ($382 million) in 2002. (Full story)

Among the few bright spots in Europe, fashion retailer Hennes & Mauritz was up 0.2 percent to 184 crowns -- but off its morning highs -- after posting higher than expected second quarter pretax profits, thanks to a strong improvement in profits in the United States and continued successes in key market Germany. (Full story)

Luxury goods group Gucci was up 1.2 percent to 101.50 euros despite posting a worse than expected fall in first quarter net profit. (Full story)

And Vivendi Environnement, the French utility unit of media giant Vivendi Universal, gained 1.7 percent to 33.21 euros after investment bank UBS Warburg upgraded its stock to "buy" from "hold" and reiterated its 38-euro target price.

The AEX index in Amsterdam fell 1.7 percent, while Milan's MIB30 index lost 1 percent and the SMI in Zurich declined 1.7 percent.

In the U.S. on Wednesday, markets lost ground in early trading, but managed to avoid a sharp plunge, after a spate of bad news hit the technology sector -- including warnings from Apple and Advanced Micro Devices.

At midday, the Nasdaq composite index was down 23.14 points, or 1.5 percent, to 1,519.82, while the Dow Jones industrial average was down 76 points, or 0.8 percent, to 9,630.1.