Correction Comes Calling in Europe

Goodyear's deal with Sumitomo boosted tire shares, but banks and telecoms retreated.
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FRANKFURT -- Stocks slid in a flurry of early-afternoon selling on concerns about company profits and a recent jump in U.S. bond yields, which some fear will spill over into European yields.

Among the biggest losers were telecoms and banks.

Deutsche Telekom

(DT) - Get Report

skidded 4.1% and its big competitor

Mannesmann

dropped 4.4%. Even the seemingly invulnerable U.K. names were weak, with

Orange

(ORNGY)

down 2.1%,

Colt

(COLTY)

down 1.9% and

Vodafone

(VOD) - Get Report

off 1.3%.

Losing banks included

Deutsche Bank

, down 1.6%,

Banque Nationale de Paris

, down 1.7%, and

Paribas

, down 2.6%.

The big movers today were tire companies. Yes, tire companies after a front-page story in the

Financial Times

reported that

Goodyear

(GT) - Get Report

will take a controlling interest in Japan's

Sumitomo Rubber Industries

.

Shares of Germany's

Continental

bounced 7.6% on the news, Italy's

Pirelli

added 4.7% and France's

Michelin

sprang 4.4%. But, not surprisingly, enthusiasm for buying tire shares did not spread into the broader market.

In Frankfurt, the

Xetra Dax

was down 89 points, or 1.7%, at 5075, while in London the

FTSE

was down 65, or 1.1%, at 5947 and in Paris the

CAC

was down 62, or 1.5%, at 4181.

Markets here are betting that the

Fed

today and the

European Central Bank

Thursday will leave rates unchanged, while some think the

Bank of England

Thursday might cut rates.

Some traders were counting on any deeper move into the negative zone being reversed by the market's ever-present oceans of liquidity.

Thomas Teetz, equities strategist at

HSBC Trinkaus

in Dusseldorf, conceded that the market was struggling, but said that in the end he thinks liquidity will win the battle. He called recent losses a correction, which he thinks is about over.

"I would be a buyer," he said. "We have no clear signal to go up, but on the other hand we have a lot of liquidity that wants to get into the market."