European markets trim losses

LONDON, England (CNN) -- European markets trimmed their losses but still closed sharply lower on Friday after a sell-off inspired by France Telecom's failure to restructure its finances.

London's FTSE 100 fell 1.9 percent to 4,008 and the CAC 40 blue chip index in Paris lost 2.6 percent to 3,156.17, while Frankfurt's electronically traded Xetra Dax was down 2.6 percent to 3,333.20 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 1.9 percent, with the computer services, insurance and information technology sub-sectors leading declines.

France Telecom (PFTE), Europe's second largest phone company, closed down 2.6 percent to 10.35 euros -- but off its lows for the session -- after Michel Bon quit as chief executive and it dumped its cash-hungry German mobile phone company.

But investors were more concerned that a board meeting late on Thursday failed to come up with a plan to cut its debts of about 70 billion euros. (Full story)

France Telecom's decision to stop funding MobilCom, Germany's fifth-largest mobile phone company, threatens 5,000 jobs. MobilCom said it would delay filing for insolvency until next week after the German government said it would meet with the ailing telecom group to work out a solution to save the company. (Full story)

MobilCom's stock was down 40 percent to 1.08 euros in late Frankfurt trading.

Nokia, which has financed some of MobilCom's wireless infrastructure, fell 2.3 percent to 14.11 euros. The company said earlier this week it would have to write off millions of euros to cover the cost of selling telecom equipment to MobilCom.

Ericsson, the world's biggest supplier of mobile phone equipment, lost 5.7 percent to 5.80 Swedish crowns. On Friday, it had agreed to convert its loans to ailing German operator MobilCom into a 444 million euro convertible loan issued by France Telecom. (Full story)

SAP (FSAP), Europe's biggest software company, was down 7.2 percent to 60.88 euros in late Frankfurt trading. Market sources told Reuters that investment bank UBS Warburg had lowered its recommendation to "hold" from "buy" and its price target to 65 euros from 90 euros.

Outside the battered technology sector, Allianz (FALZ), Europe's biggest insurer, was down 9.5 percent to 100.16 euros in late trading after saying it would pump $750 million into its U.S. unit Fireman's Fund to cover asbestos-related cases.

The banking sector could not escape the clutches of France Telecom's decision to dump MobilCom. Banks which had lent money to Germany's fifth-largest mobile phone company were punished.

Dutch group ABN AMRO lost 6.5 percent to 14.04 as dealers suggested the bank has an exposure of about 500 million euros to MobilCom, Reuters said. Germany's Deutsche Bank (FDBK) was down 0.8 percent to 59.59 euros -- off its session lows -- in late Frankfurt trading, and France's Societe Generale (PGLE) lost 3.9 percent to 54.15 euros -- both with exposures to MobilCom.

Vivendi Universal (PEX), Europe's biggest media company, fell 6.5 percent to 13.20 euros amid fears it would find it difficult to sell enough assets to cut its 19 billion debt pile.

The AEX index in Amsterdam declined 2.9 percent and Milan's MIB30 index slipped 1.7 percent, while the SMI in Zurich lost 2.4 percent.

In the U.S. on Friday, markets were unsettled in earlier trading after profit warnings from aerospace parts maker Honeywell International and telecom equipment maker Lucent Technologies, and a downbeat consumer sentiment report.

The University of Michigan's preliminary reading of September consumer sentiment showed a steeper-than-expected decline. The index fell to 86.2 from 87.6 in August. Economists were expecting a slight increase to 88.

At 1015 EST, the Dow Jones industrial average was down 85.10 points to 8,294.31 and the Nasdaq composite index was up 5.43 points to 1,285.11. The Standard & Poor's 500 index lost 3.22 to 883.69.