(MENAFN - AFP) European stocks slid on Tuesday as nervous investors eyed news that Russia had detected the launch of two missiles in the Mediterranean, amid expectations of Western military action in Syria.
In late morning deals, London's FTSE 100 index fell 0.31 percent to 6,486.15 points, reversing earlier slender gains.
Frankfurt's DAX 30 shed 0.63 percent to 8,192.38 points and the CAC 40 in Paris lost 0.62 percent to 3,981.34.
"Investors are running for cover with talk of missile firings being detected from the Mediterranean," said analyst Mike McCudden at online brokerage Interactive Investor.
"The initial panic appears to have settled but with many investors having a short window to re-evaluate their portfolios we should be in for a bumpy ride today."
He added: "Speculation that the missiles fired in the East Mediterranean are US test missiles has restored some calm to the markets, but this episode and sharp spike lower serves to highlight the nervous situation playing out in the Middle East will not be going away any time soon."
Russia said announced that its missile early warning system had detected the launch of two missiles from the central part of the Mediterranean Sea fired towards the Sea's eastern coastline.
The launches took place at 10:16 am Moscow time (0616 GMT) and were detected by the early warning system in Armavir in southern Russia, the defence ministry said in a statement quoted by Russian news agencies.
It said Defence Minister Sergei Shoigu had already reported to President Vladimir Putin about the event, which comes amid growing expectations of Western military action in Syria.
"The news was characterised by moves towards havens by investors -- for example, a brief spike in the gold price -- but this has now retrenched slightly," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.
"The market is likely to remain jittery until the full extent of any action is known," he told AFP.
Prior to the news, European equities had experienced flat trading as takeover activity in the telecoms sector was offset by investor caution before this week's interest rate calls.
Finnish telecommunications group Nokia announced the sale of its mobile phone division to Microsoft for 5.44 billion euros (7.17 billion) on Tuesday.
The news came one day after US telecoms giant Verizon and Vodafone of Britain agreed that the British company would sell its 45-percent stake in their joint venture Verizon Wireless for 130 billion (99 billion euros).
Later this week, on Thursday, investors will digest the latest interest rate decisions from the Bank of England and the European Central Bank.
"Investor confidence has been given a further boost with a pick-up in merger and acquisitions (M&A) activity, but with rate calls this week investors will be nervous of a swift change in sentiment on the back of the strengthening global recovery," added McCudden.
Following the Microsoft announcement, Nokia's share price soared as much as 45 percent.
The stock later stood at 4.1 euros in midday deals, up 38.26 percent on the Helsinki stock exchange, sending the overall market up by 3.7 percent.
The Microsoft deal will bring and end to Nokia's days as a phone maker, and will also grant the US software giant a 10-year non-exclusive licence to its patents. Nokia, once the darling of the mobile phone industry, has struggled to compete with smartphone market leaders Apple and Samsung.
Hargreaves Lansdown's Richard Hunter added that US groups were eager to snap up assets.
"The European stage is seen as one with growth potential for the big US companies," he told AFP.
"It is often forgotten that, as a whole, the eurozone is the world's second-largest economy.
"The M&A activity has already been positively received," he said adding that there was speculation about whether AT&T were also on the prowl.
"Potentially it is a sign that, at last, companies are preparing to spend some of their cash piles on acquisitions."
In London, Vodafone's share price fell 2.77 percent to 207.3 pence on profit-taking, as investors digested the Verizon Wireless buyout.
The vast 130-billion deal -- which would be one of the biggest transactions in corporate history -- would allow Vodafone to bounce back from hefty losses, pay down debt, make new acquisitions and return money to shareholders, analysts said.
Asian equities extended their gains Tuesday and the dollar pushed back towards 100 yen after strong manufacturing data in China and Europe pointed to an uptick in the global economy.
Wall Street was shut on Monday for the Labor Day public holiday.