LONDON (CNN) - Signs of a rally in European shares disappeared by the close of business Wednesday, with all key indices ending lower in nervous trading.
Frankfurt's Xetra Dax was down 1.5 percent at 5,437.54 late in the session, while London's FTSE 100 dropped 0.8 percent to 5,461.6. The blue chip CAC 40 index in Paris closed down 0.6 percent at 4,933.97.
Deutsche Telekom (FDTE) fell 4.5 percent after a public appeal to shareholders by CEO Ron Sommer had the opposite of the intended effect. Sommer wrote an open letter, printed in major German newspapers Wednesday, arguing that the recent share price slump was unwarranted.
Drug maker Bayer (FBAY) has vied with Telekom in the past week for the title of Europe's most unloved stock, and it was right behind the phone company on the list of the Dax's biggest losers on Wednesday.
Bayer fell 4.1 percent after U.S. law firm Kenneth B. Moll & Associates told CNNfn.com that it plans to launch a multi-billion dollar lawsuit against the company. The German company's cholesterol-lowering treatment Baycol has now been linked to 52 deaths. Lead attorney Kenneth Moll said the class-action lawsuit could cost the company at least $3 billion.
Telecom shares in the cold again
In other European markets, shares linked to the telecom and high-tech industries took another caning, after staging a recovery in the early part of this week.
Finland's Nokia, the world's No. 1 maker of mobile phones, slid 6 percent in Helsinki, pulling the Finnish Hex index to a loss of 3.4 percent. Ericsson of Sweden, one of Nokia's key rivals, was down 2.7 percent. French based competitor Alcatel (PCGE) retreated 2.3 percent.
Among telecom operators, France Telecom (PFTE) shed 2.2 percent in Paris, and a gaggle of UK phone stocks saw their recent advances wiped out: TeleWest Communications (TWT) was the FSE index's weakest performer, losing 6.7 percent, while Colt Telecom Group (CTM) was down 5 percent, Energis (EGS) dropped 3.8 percent and Vodafone, the world's biggest cell phone operator, shed 3 percent.
STMicroelectronics (PSTM), Europe's biggest chipmaker, closed down 2.8 percent after enjoying a rally earlier in the day on the back of a raised recommendation from investment bank ING Barings. ARM Holdings (ARM), Europe's No.1 chip designer, dropped 4.5 percent, and Netherlands-based ASML, a maker of chip manufacturing equipment, fell 2.5 percent.
British drug company Shire Pharmaceuticals (SHP) slid 5.1 percent after the company offered a $350 million 10-year convertible bond to investors. The money raised will fund growth.
"The weakness is from buyers of the convertible bond hedging their purchase by selling the equity. The stock should bounce back up within the week," Dresdner Kleinwort Wasserstein
Software stocks weaken
Software maker Sage Group (SGE) shed 3.1 percent in London, and SAP (FSAP), Europe's No. 1 in the software industry, was down 2 percent. British IT consultant Logica (LOG) also posted a 3.1 percent loss.
In Amsterdam, the AEX index slipped 1 percent and the SMI in Zurich fell 0.7 percent. Elsewhere in the region, markets in Italy and Spain were closed for the Assumption Day holiday.
The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, ended down 0.9 percent, with the telecom and information technology sub-indices among the biggest sector losers.
Stocks on Wall Street weakened by midday, after reports on inventories and factory activity failed to offer any support for a more optimistic take on the prospects for the economy. The Nasdaq composite index fell 1.9 percent to 1,927.7, while the Dow Jones industrial average was down 0.4 percent at 10,371.78. 
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