Europe tumbles on tech woes

LONDON, England (CNN) -- European markets tumbled to a close on Wednesday, dragged down by weak economic reports and a dismal outlook for the technology sector.

The negative sentiment deepened following early declines on Wall Street, where U.S. investors continued to punish tech stocks after a string of disappointing results.

London's FTSE 100 fell 4 percent to 4,274 and the CAC 40 blue chip index in Paris lost 4.2 percent to 3,419.74, while Frankfurt's electronically traded Xetra Dax was down 4.1 percent to 3,691.91 in late trading (the German market was set to close at 1800 GMT).

The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was down 3.8 percent to 962.59, with the insurance, computer and information technology sub-sectors leading declines.

The AEX index in Amsterdam dropped 4.5 percent and Milan's MIB30 index was 3.6 percent lower, while the SMI in Zurich declined 4.1 percent.

Markets began tumbling at the start of trading after tech giants Nortel and Hewlett-Packard offered gloomy predictions for the sector late on Tuesday.

Nortel, the Canadian telecom equipment maker, said it would axe another 7,000 jobs after already cutting more than 35,000 jobs this year. It also said third-quarter revenue would decline by 10 percent compared to the second-quarter level. (Full story)

Hewlett-Packard's Chief Financial Officer Bob Wayman painted a bleak picture for the industry in an interview with Reuters. (Full story)

"All of us are seeing a few new signs of weakness,'' he said, referring to the industry as a whole, when asked to compare his current outlook with that on June 4. "We are leveling out in the U.S. and seeing some risks around the world.''

Adding to the negative sentiment in the market was a surveying showing confidence among German business leaders deteriorated for a third straight month in August -- indicating Europe's biggest economy, which barely grew in the second quarter of this year after falling into recession in the previous two quarters, could weaken further in coming months. (Full story)

That followed a weaker-than-expected U.S. consumer confidence report on Tuesday.

"Worries about the mindset of the U.S. consumer will dominate the market for the next couple of weeks. Equities have had a good run recently and investors were looking for a reason to take profits," Josef Scarfone, a European fund manager for Frankfurt Trust, told Reuters.

Alcatel (PCGE), Europe's biggest telecom equipment maker, fell 8.8 percent to 5.38 euros in Paris, while the world's largest mobile phone maker Nokia lost 6.4 percent to 13.58 euros in Helsinki and Swedish rival Ericsson was flat at 6.50 crowns.

SAP (FSAP), Europe's biggest computer software company, was down 6.2 percent to 78 euros in late Frankfurt trading, the region's biggest computer services company CAP Gemini (PCAP) dropped 4.7 percent to 32.42 euros, while Europe's third-biggest chip maker Philips Electronics declined 6.6 percent to 21.95 euros.

Outside the tech sector, Dutch-Belgium financial services group Fortis fell 5.9 percent to 18.30 euros after posting a decline in profit, but analysts believe the full impact of its huge losses on equity investments will not be felt until the third quarter. (Full story)

Carrefour, Europe's biggest retailer, slipped 3.7 percent to 44.30 euros despite reporting a better-than-expected 25 percent jump in its pre-exceptional first-half net earnings. (Full story)

Anglo-Australian services and logistics company Brambles dropped 10.1 percent on profit margin concerns. (Full story)

In the insurance sector, Germany's Allianz (FALV) led decliners in late Frankfurt trading, dropping 7.1 percent to 135.50 euros. Swiss Re fell 3.7 percent to 122.75 Swiss francs in Zurich and Munich Re (FMUV2) was down 6.4 percent to 183.69 euros in late Frankfurt trading. Both Swiss Re and Munich Re report their first-half results on Thursday.

Oil and gas stocks were pulled lower by reports that OPEC would raise oil output in September to stop prices from running out of control, despite opposition from some leading cartel figures. (Full story)

Shell Transport & Trading (SHEL) -- which owns 40 percent of Royal Dutch/Shell Group -- fell 4.4 percent to 441.5 pence in London, while Royal Dutch -- which owns the rest of the group -- lost 4.2 percent to 46.11 euros in Amsterdam. TotalFinalElf (PFT) declined 4.3 percent to 143.60 euros in Paris.

In the U.S. on Wednesday, investors sold off tech stocks after Nortel Networks' revenue warning combined with disappointing guidance from chipmakers. That was followed by Credit Suisse First Boston slashing its third-quarter loss estimates for Nortel and by Merrill Lynch lowering its quarterly and full-year estimates for the Canadian company.

Compounding the tech woes, Goldman Sachs published bearish comments on Sun Microsystems, the leading supplier of Unix servers, saying it believes current weakness in information technology will increase the probability that Sun will miss its estimate for the next quarter.

In mid-morning trading, the Nasdaq composite index was down 15.90 points to 1,332.31, while the Dow Jones industrial average lost 73.66 points to 8,751.52. The Standard & Poor's 500 index was down 9.41 points to 925.62. (Full story)