Europe tumbles on tough talk

LONDON, England (CNN) -- European markets sank on Thursday after guarded comments about the U.S. economy from the head of the Federal Reserve and tough talk on Iraq from the U.S. president.

Fed Chairman Alan Greenspan told the U.S. Congress the economy had withstood many challenges in the past year, including terror attacks and corporate scandals, but he said lawmakers still need to keep a lid of federal spending. (Full story)

President George W. Bush, in a speech to the United Nation, said Iraqi leader Saddam Hussein must comply with U.N. resolutions or face possible military action to remove him. (Full story)

Prior to the speeches by Greenspan and Bush, European markets had piled up losses after a string of disappointing corporate results and a Fed report on Wednesday that showed growth had slowed in the world's biggest economy.

London's FTSE 100 fell 3 percent to 4,084.9 and the CAC 40 blue chip index in Paris dropped 4.6 percent to 3,241.84, while Frankfurt's electronically traded Xetra Dax was down 3.5 percent to 3,459.92 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 3.5 percent, with the aerospace & defence, insurance and information technology sub-sectors leading decliners.

Leading the aerospace sector lower was BAE Systems (BA), Europe's biggest defence company and the Pentagon's sixth-biggest contractor. It plunged 14.4 percent to 230.55 pence after posting an unexpected loss as it continues to face cost overruns on key projects. It slid 9 percent to 247 pence. (Full story)

France Telecom (PFTE), the debt-laden European phone company, lost 3.7 percent to 10.63 euros. The company is expected to ask shareholders for about 15 billion euros to help cut its debt mountain. The board was meeting on Thursday to discuss the future of its CEO and end its association with loss-making German mobile phone company MobilCom. (Full story)

Deutsche Telekom (FDTE), Europe's biggest phone operator, was down 1.8 percent to 10.64 euros in late Frankfurt trading.

Vodafone Group (VOD), Europe's biggest mobile phone company, fell 6.1 percent to 93.07 pence after investment bank UBS cuts its recommendation on the stock to "hold" from a "strong buy," Reuters said. UBS is one of Vodafone's house brokers.

Orange (ORA), Europe's third-largest wireless operator, dropped 5.8 percent to 92.50 euros and No. 5 operator mmo2 (OOM) ended down 7.3 percent to 47.42 pence.

Nokia, the world's largest mobile phone maker, fell 4.4 percent to 14.50 euros and Swedish rival Ericsson lost 6.1 percent to 6.15 crowns.

Dutch chipmaker Philips Electronics fell 4.4 percent to 17.40 euros after it cut its chip sales forecast for the third quarter, saying revenues will drop between 13 and 15 percent compared with the second quarter. (Full story)

Technology stocks sagged after the tech-laden Nasdaq weakened on Wednesday. Infineon Technologies (FIFX), Europe's second largest chip maker, was down 9.3 percent to 9.23 euros in late Frankfurt trading.

The region's biggest software maker SAP (FSA) was down 3.3 percent to 66.23 euros in late trading, while telecom equipment maker Alcatel (PCGE) closed down 5.1 percent at 4.10 euros in Paris.

Credit Agricole, France's third-largest bank, dropped 9.9 percent to 18.65 euros. The retail bank posted a larger-than-expected 26.9 percent drop in first-half profit as earnings declined at its Italian partner IntesaBCI. (Full story)

Corus Group (CS), the Anglo-Dutch steel makers, fell 7.7 percent to 51.50 pence in London after it said the pace and timing of a recovery in its major markets was uncertain as it reported a 207 million pounds ($322 million) operating loss for the first-half. (Full story)

UK insurer Royal & Sun Alliance (RSA) slipped 0.8 percent to 122.1 pence after firing its embattled chief executive and saying it would make a quick decision on whether to seek a cash infusion from shareholders. (Full story)

At the positive end of the market, Britain's P&O Princess Cruises (POC) gained 3 percent to 459.3 pence following news that U.S. regulators are set to allow a tie-up with either Royal Caribbean Cruises or sector leader Carnival Corp. (Full story)

The AEX index in Amsterdam fell 4.9 percent and Milan's MIB30 index lost 3.3 percent, while the SMI in Zurich declined 3.3 percent.

In the U.S. on Thursday, markets fell in early trading after dour economic comments by Federal Reserve Chairman Alan Greenspan, along with brokerage concerns about the chip equipment sector and fast-food retailer McDonald's. (Full report)

However, the U.S. markets were not moved by President George W. Bush's hawkish comments on Iraq before the United Nations. (Full story)

At 1030 EST, the Dow Jones industrial average was down 155.15 points to 8,426.02 and the Nasdaq composite index was off 25.74 points to 1.289.71. The Standard & Poor's 500 index dipped 15.45 points to 894.