European markets tumbled yesterday as German software giant SAP issued a shock profit warning. The news rattled markets late in the day, just as they were stabilising after earlier jitters over news that US drugs giant Bristol Myers Squibb was under investigation over inflated earnings.

More than €15 billion was wiped off the value of leading European shares and, in Dublin, the Irish Stock Exchange gave up almost €2 billion as it fell to a level last seen in October 1998.

The story was repeated around Europe, with London's Footsie off 4.3 per cent at a five-year low of 4,230.00, the German DAX down 1.71 per cent and the French CAC 3.95 per cent lower.

The US market's gains were not widespread, however, and many Wall Street experts were doubtful the momentum could be sustained.

Overall, the mood was one of resignation, with traders waiting for the now daily dose of bad news on corporate accounting. "Every day something drags things down," said one Dublin trader.

Yesterday, there was a double whammy with early reports about an investigation into the earnings of US blue-chip drug giant Bristol Myers Squibb setting markets back early in the day. The company acknowledged it was the subject of a federal accounting probe by the Securities and Exchange Commission (SEC).

Earlier, the Financial Times said the SEC was looking into whether it offered inappropriate incentives to wholesalers to help meet 2001 earnings expectations, inflating its revenues by $1 billion (€1.01 billion) last year.

Shares in the company touched levels not seen since 1995 before coming back to close down 4.5 per cent on the day.

Insurers were particularly vulnerable early on in Europe amid worries about the damage the equity bloodbath was doing to their investment portfolios.

Just as European markets were settling for losses of between 1 and 2 per cent in mid-afternoon trading, the SAP warning knocked them back again.

Europe's largest software group cut its 2002 forecasts and reported second-quarter results that missed analysts' forecasts. The news triggered a 20 per cent decline in the company's share price, wiping out more than €5.6 billion from its market value at one point.

SAP said it had been badly hit by the slump in corporate confidence in the United States and Europe in the wake of the Enron and WorldCom accounting scandals and had lost a number of deals in June for which it had verbal agreements.