FRANKFURT -- Europe is tense, with the German stock market continuing to crumble and the euro hitting another low against the dollar.

The

Dax

Wednesday afternoon dropped out of its tight range, slipping below key support at 4750 and triggering strong sell signals. The Dax opened modestly higher today but enthusiasm quickly vanished, and in electronic trading the blue-chip index was down 42 points at 4626.

Big losers included

DaimlerChrysler

(DCX)

, down 3.4%,

Deutsche Telekom

(DT) - Get Report

, down 5.3%, and energy group

RWE

, down 4%.

Damage was heavier on Germany's highflying

New Market Index

, which includes more tech issues and gave up 6.4%.

Nick Glydon, technical analyst at

Robert Fleming Securities

in London, said the break below Dax 4750 struck a major blow to the already underperforming market in Germany, which is suffering from generous wage agreements, political confusion and a slowing economy.

Glydon thinks a Dax rendezvous with support at 4500 is a certainty, and that German weakness might spread across Europe. "I have a horrible feeling that the Dax is an early indicator for all of Europe," he said.

In London the

FTSE

was down 19 at 6028 and in Paris the

CAC

was up 21 at 4025.

The

European Central Bank's

policymaking Governing Council is meeting in Frankfurt today, but consensus is that the key short-term rate will be left unchanged. The market nonetheless is ruling nothing out. Traders remember quite well Dec. 3, when the Bundesbank and other euroland central banks sprang a rate cut on an unsuspecting market.

The nervous mood in Europe was underscored by further weakness in the euro, which this morning slipped below support at $1.0850 for the first time. The dollar also gained against the yen to 122.99.

The weaker euro reduced the allure of European bonds, with yields on the benchmark 10-year German bund rising 4 basis points to 4.17%.

Roland Lienau, head of capital markets at

Paribas

in Frankfurt, said, "With yields rising, valuations are becoming stretched." And thinks the major European stock indices will fall further.

On the corporate front, a rise in crude oil prices helped lift the oil sector, with

Shell

(SC) - Get Report

3.9%,

BP Amoco

(BPA)

up 3.4%,

Total

(TOT) - Get Report

up 2.6% and

Elf Aquitaine

(ELF) - Get Report

up 3.4%.

The French market was keeping its head above water with help from banks.

Banque Nationale de Paris

was up 5%,

Credit Commercial de France

up 4.5% and

Societe Generale

up 3%.

French telephone equipment firm

Alcatel

(ALA)

was up 2.6% after announcing a second purchase this week of a U.S. company. Alcatel said it was paying $350 million in cash for California-based

Assured Access Technology

. Alcatel earlier this week agreed to buy

Xylan

(XYLN)

for $2 billion.