French financials took another tumble, driven lower by rumours that industrial depositors may be withdrawing large sums of cash and speculation that China was halting foreign exchange swaps with some of Europe’s banks.

French banks continued their decline amid reports that Siemens had withdrawn more than half-a-billion euros in cash deposits from one of the country’s largest lenders two weeks ago and transferred it to the European Central Bank.

Société Générale shed 3.1 per cent to €17.15 while BNP Paribas lost 6.5 per cent to €24.92 and Crédit Agricole slipped 2.1 per cent to €4.78. Natixis fell 4.3 per cent to €2.23.

Meanwhile, rumours that China had stopped trading forex swaps and forwards with a number of European banks due to the worsening debt crisis in the region also hit the sector.

Milan’s FTSE MIB index rose 1.9 per cent to 14,356.13, despite Standard & Poor’s downgrading Italy’s sovereign debt rating by one notch to A, leaving it with a negative outlook.

An auction of Spanish bonds soothed investor nerves after being viewed as a success. Although the average yield paid moved higher, the sale was well covered and the government raised its target total.

The FTSE Eurofirst 300 climbed 2 per cent to 934.16, led mainly by industrial stocks. RWE, the German electricity utility, and its rival Eon, rose 3.7 per cent to €25.93 and 4 per cent to €15.77, respectively.

Italy’s Fiat led European carmakers higher. The Eurofirst 300’s car sub-index has fallen by nearly a third over the past six weeks on fears a global economic slowdown would hit demand in the sector.

Fiat climbed 7.2 per cent to €4.31, Germany’s Volkswagen added 4.8 per cent to €114, and France’s Peugeot gained 2.6 per cent to €18.07.

Deutsche Telekom climbed 3.4 per cent to €8.61 after Nomura readjusted its price target to €11.80 from €13 but kept its stock rating at “buy”. The broker said Germany’s biggest telecommunications group had adopted a “sensible management strategy in the current environment”, and that its dividend security was high.

German airline Lufthansa fell 4.4 per cent to €10.32 after the company cut its full-year outlook after a weaker-than-expected August.

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