European shares fell in morning trade on negative signals from Wall Street's losses last night, a 2.2% drop by Tokyo's Nikkei overnight and mild dollar weakness.

Frankfurt

German shares dropped back in early trade, as declines on Wall Street and a weaker dollar combined to depress investor confidence.

At 1140 local time, the leading Dax index was down 92 points at 4,590.

Dealers said the make-or- break of today's session will the banking sector.

HypoVereinsbank reported an 11.9% jump in nine month pre-tax profits and operating profits up 10.3%, but these were offset by a big risk provision.

Deutsche Bank confirmed that it may spin off its retail banking unit.

Deutsche Telekom said its preliminary nine month profit was Dm3bn compared with Dm2.5bn a year earlier.

Paris

French stocks headed lower on their opening as investors became inclined to take profits after yesterday's 2.9% jump in the benchmark index.

The leading Cac 40 index was 65 points lower at 3,485 as other European bourses also slipped back.

"The Paris bourse will be hurt by profit-taking as the impact of Italy's rate cut was fully priced into the market," said a trader at a Paris-based brokerage house. The Italian central bank cut its key lending rate to 4% from 5% Monday.

Alcatel's sales figures released earlier were mostly in line with expectation. Third-quarter revenues decreased to FFr30.7bn from FFr31.0bn in the same period of 1997.