LONDON (CNN) - European stock markets closed sharply lower Tuesday after Cap Gemini Ernst & Young and U.S. broker Merrill Lynch issued profit warnings.
Cap Gemini (PCAP), Europe's biggest computer services company, plunged as much as 23 percent after saying customers were delaying and canceling orders in the financial, tech and manufacturing sectors.
And the top U.S. broker, Merrill Lynch (Research, Estimates), set Europe's banking sector trembling after warning its second-quarter earnings would be 37 percent below expectations because of poor stock and trading operations.
London's FTSE 100 fell 106 points, or 1.9 percent, to close at a 12-week low of 5,555.7, with software company Logica (LOG) topping the losers, down 9.4 percent, and rival CMG (CMG) down more than 8 percent.
Business software company Sage (SGE) fell nearly 7 percent and telecoms equipment company Marconi (MONI) ended 6.5 percent lower.
In Paris, the CAC 40 blue chip index lost 123 points, or 2.4 percent, to close at 5,090.7. Thomson Multimedia (PHO), a French consumer electronics company, fell 7.9 percent on concerns Europe's economy is slowing.
Software firm Dassault Systeme (PDSY) was down 4.2 percent and Europe's fourth-largest telecom equipment maker, Alcatel (PCGE), lost more than 5 percent.
Frankfurt's electronically traded Xetra Dax declined 103 points, or 1.8 percent, to 5,799, with chipmaker Infineon Technologies (FIFX) the main loser, down 9.5 percent. Europe's biggest software company, SAP (FSAP), lost 4.8 percent.
In Amsterdam, the AEX index shed 1 percent as Philips Electronics said it would stop making mobile phone handsets and take a charge of  300 million to reorganize the business. Philips, Europe's biggest consumer electronics company, fell more than 5 percent.
The SMI in Zurich was 1.4 percent lower and Milan's MIB30 index dipped 1.2 percent.
The pan-European FTSE Eurotop 300, a broader index of the region's largest stocks, was down 1.8 percent, with the computer services sector plunging 8.3 percent and the information technology and telecom sectors sliding more than 2.5 percent.
Among the continent's most closely watched stocks, Finland's Nokia, the world's biggest maker of wireless handsets, fell 2.5 percent. Ericsson, which is farming out production of its mobile phones, ended flat.
But European banks paid a price for Merrill Lynch's gloomy prediction.
In Frankfurt, Deutsche Bank (FDBK) was off 3.6 percent, HSBC (HSBA) lost 3.8 percent in London, and Barclays Bank (BARC) fell 4.1 percent, while Societe Generale (PGLE) lost 2.8 percent in Paris.
U.S. stocks faltered Tuesday after a slew of warnings and analyst downgrades dashed hopes for good news as the Federal Reserve started its two-day meeting on interest rates.
The financial sector was hit after Merrill Lynch issued a profit warning. Technology stocks were close behind after Goldman Sachs lowered estimates on 39 firms in the sector.
In mid-morning trading in the U.S. Tuesday, the Dow Jones industrial average fell 81.86 points to 10,422.36. The Nasdaq composite index shed 24.37 points to 2,026.50 while the S&P 500 slid 10.35 to 1,208.25.
In the currency market, the euro rose sharply against the U.S. dollar to 86.24 U.S. cents from 85.86 in late New York trading on Monday.
The euro rose ahead of the U.S. Federal Reserve meeting Tuesday amid concerns an expected 0.50 percentage point rate cut could signal the world's biggest economy is in more trouble than had been perceived.
"There is some concern that a 50 basis point rate cut could lead to inflation rising (in the U.S.) later this year," Stephen King, economist at HSBC, told CNN. 
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