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D-Telekom leads Europe lower

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LONDON, England (CNN) -- European markets tumbled to a close on Wednesday as shares in debt-laden Deutsche Telekom fell after it announced a sale of bonds that can be converted into shares and Wall Street got off to a weak start.

London's FTSE 100 fell 1.9 percent to 3,658.3 and the CAC 40 blue chip index in Paris lost 2.7 percent to 2,859.19, while Frankfurt's electronically traded Xetra Dax was down 3.6 percent to 2,642.06 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, was down 2.4 percent.

"Markets moved higher too hard and too fast over the past couple of sessions when nothing fundamentally changed," Gerard Piasko, the chief investment officer at Julius Baer Private Banking in Zurich, told Reuters.

"The U.S. is still pushing ahead with its plans for war against Iraq, global supply of goods continues to outstrip demand and corporate earnings estimates need to fall."

Deutsche Telekom (FDTE), Europe's largest phone company, was down 8.7 percent to 11.80 euros in late Frankfurt trading. On Wednesday, the group said it would issue a 2.3 billion euro convertible bond, which means investors who buy the bond would be able to exchange bonds for stocks. (Full story)

Shareholders are concerned their investment will be diluted when the bonds are converted.

Rival France Telecom (PFTE) dropped 5.9 percent to 22.70 euros in Paris.

Telefonica Moviles, Spain's dominant mobile phone operator, fell 1.9 percent to 6.05 euros after it posted a worse-than-expected 2002 loss of 3.7 billion euros.

Meanwhile, HVB (FHVB), Germany's second-largest bank, was up 0.6 percent to 10.98 euros -- even as it delivered its first ever loss and said it would not pay a dividend for 2002. (Full story)

However, Deutsche Bank (FDBK), the country's biggest bank, was down 3.9 percent to 39.60 euros in late trading and insurer Allianz (FALV), which owns Dresdner Bank, was 4.6 percent lower at 73.40 euros.

Volkswagen (FVOW), Europe's biggest carmaker, was down 2.1 percent to 35.62 euros in late Frankfurt trading after it posted a decline in full-year pretax profit as it continued to lose ground to competitors. Full story

In London, the world's biggest households cleaning products group Reckitt Benckiser (RB-) dropped 10.1 percent to 957.48 pence after a leading shareholder said it would raise about 1 billion euros ($1.1 billion) through the sale of Reckitt shares.

Meanwhile, BAE Systems (BA) jumped 10.1 percent to 128.15 pence after Europe's biggest defence company said it reached a deal with Britain to cap cost overruns on two defence contracts at 750 million ($1.2 billion), boosting its shares. The group reports its full-year results on Thursday. (Full story)

Six Continents (SXC) rose 6.4 percent to 609 pence after restaurant entrepreneur Hugh Osmond said he may launch a multi-billion pound bid for the hotel and pub operator. (Full story)

The AEX index in Amsterdam was down 2.6 percent and Milan's MIB30 index lost 2.2 percent, while the SMI in Zurich fell 2.7 percent.

In the U.S. on Wednesday, markets were headed lower at midday amid the belief that war in the Middle East may be postponed but is unlikely to be avoided.

After two days of rallies on the hope that a peaceful solution to the Iraq crisis might be found, the Dow Jones industrial average was down 37.81 points to 8003.34 and the Nasdaq composite fell 6.54 points to 1340.00. The S&P 500 index was down 4.72 points to 846.45.

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