LONDON (CNN) - A new bout of nervousness in the telecommunication and technology sectors sent European bourses reeling well into the red Thursday.
Reports from a pair of U.S.-based telecom companies extinguished any confidence that was reappearing in European markets and sent stocks such as Deutsche Telekom, Alcatel and Energis sliding to heavy losses.
Frankfurt's Xetra Dax dropped 1.9 percent to 5,350.82 in late trading, having earlier hit a 21-month low of 5,334.49, after the Bundesbank said German economic growth slowed to a standstill in the second quarter.
London's FTSE 100 fell 1.3 percent, to 5,389.8 and the CAC 40 blue chip index in Paris declined 1 percent to 4,882.62.
Investors on both sides of the Atlantic were shaken by a report from U.S. fibre-optic network developer Ciena (CIEN: Research, Estimates), which warned analysts to slash their forecasts of profit and sales growth for this year and next.
That came after a report of a bigger-than-expected second-quarter loss at VoiceStream Wireless, the U.S. mobile-phone operator bought for $24 billion earlier this year by Deutsche Telekom.
More grief for Telekom
In Frankfurt Thursday, Deutsche Telekom (FDTE) dropped 5.4 percent and was hovering close to a three-and-a-half year low of  18.01 in afternoon trading. Chief Executive Ron Sommer's attempt to stem a decline in the shares of Europe's biggest phone company by publishing an open letter to shareholders appeared to fall on deaf ears.
The telecom sell-off wrought havoc in London, where Energis (EGS) slumped 11.9 percent, cable operator TeleWest Communications (TWT) shed 7.1 percent, and British Telecommunications (BT-A) dropped 5.3 percent. Mobile operator Vodafone (VOD), telecoms testing company Spirent (SPT) and equipment maker Marconi (MONI) all lost more than 3.5 percent.
In Paris, telecom equipment provider Alcatel (PCGE) dropped 5.7 percent and France Telecom (PFTE) shed 4.9 percent, the two biggest losers on the CAC index. Mobile network operator Orange (POGE), controlled by France Telecom, was down 2.9 percent.
Finland's Nokia, one of Europe's most closely watched stocks, fell 4.7 percent, Sweden's Ericsson dropped 2.8 percent, and German technology and engineering firm Siemens (FSIE) dipped 3.7 percent.
German drug maker Bayer (FBAY) plunged 6.5 percent, continuing a week-long decline triggered by the withdrawal of anti-cholesterol drug Baycol, which has been linked to 52 deaths.
The company said late Thursday it had delayed plans to list its shares in the U.S. from September to February 2002, in light of uncertainty caused by the drug's withdrawal. Bayer faces the prospect of class-action lawsuits by U.S. users of the drug, at the same time as it reviews strategy for its entire drug-making unit.
Among the bright spots for European stocks, Swiss health-care group Novartis rose 2.7 percent after posting a better-than-expected 10 percent increase in profit, as sales at its flagship drug operation rose 13 percent.
German utility E.ON (FEOA) rose 2.7 percent after it reported a 52 percent rise in first-half operating profit, helped by higher earnings in its energy business, and said it expected to post higher full-year profit this year than last.
In Amsterdam, the AEX index fell 0.5 percent and the SMI in Zurich was down 0.9 percent, while Milan's MIB30 index dipped 1 percent.
The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, fell 1.2 percent, with the information technology sub-index down 4.1 percent and the telecom sectors sliding 3.7 percent.
On Wall Street, the bearish reports from telecom firms clobbered investor sentiment. By late morning, the Nasdaq Composite index was down 1.65 percent at 1,887.25, while the Dow Jones industrial average dropped 59.9 points, or 0.6 percent, to about 10,285. 
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