Europe's leading shares fell for the third-day running in late trade yesterday, weighed down by depressed financials like Credit Suisse, ahead of a key week of earnings for banks and insurers.
Technology stocks were weak too, after German chip maker Infineon was hit by a brace of broker downgrades.
But volumes were below average and overall losses were pared as heavily-weighted oil stocks tracked a firmer crude price and as cash was put to work in more defensive areas like utilities.
By 1639 GMT, with only Frankfurt still trading officially, the FTSE Eurotop 300 index was down 0.61 per cent at 879 points as decliners led advancers by more than two-to-one.
That left the benchmark index some six per cent off last week's highs, but almost 12 per cent firmer than the five-and-a-half-year intraday low plumbed in early October.
Strategists said the market could continue zig-zagging within a range over coming months. Investors, they said, were prepared to buy near recent lows because shares were cheap but many were unwilling to chase the market higher because corporates were not yet seeing a solid pickup in sales.
"The selling pressure may have dried up but we're increasingly seeing less enthusiastic buying," said Robert Kerr, European equities strategist at Bank of America.
The narrower DJ Euro Stoxx 50 index shed 0.65 per cent to 2,434.
Swiss bank Credit Suisse was among Europe's biggest losers, dipping 5.4 per cent amid expectations it will report a third-quarter loss of around two billion Swiss francs on Thursday and on talk of 350 million francs tax charge.
A big week of European earnings shifts up a gear today, with the heavily-weighted banking sector, chemical producers and mobile phone operators all well-represented.
Europe's second-biggest lender UBS reports third quarter earnings today, as does Italy's top lender IntesaBCI and compatriot bank Sanpaolo IMI. Europe's biggest mobile phone group Vodafone also steps up to the plate with its first half results while German chemical and drugs conglomerate Bayer reports on its third quarter.
Losses in Europe's insurance and banking sectors came as investment bank West LB Panmure warned that a new wave of European insurers might soon be forced to make emergency cash calls to bolster their balance sheets.
Among insurers Allianz fell 4.4 per cent, Munich Re dropped 3.4 per cent and Axa fell 1.6 per cent. Axa reports third-quarter sales figures today and Allianz follows with its third-quarter earnings on Thursday.
Infineon tumbled 11.7 per cent. Investment banks Goldman Sachs and Deutsche Bank cut their ratings on the stock after the group reported a worse-than-expected fourth-quarter loss on Friday.
Shares in Siemens fell 4.0 per cent to e43.19 after investment bank CSFB cut its price target on the stock to e43.5. The German tech and engineering firm reports its full year earnings tomorrow.
The tech sector was further weighed down by a poor performance on Wall Street, where the tech-heavy Nasdaq Composite fell 2.0 per cent and the Dow Jones industrial average eased 1.3 per cent.
Energy stocks such as BP and TotalFinaElf bucked the trend and rose 0.6 per cent and 1.5 per cent respectively, as crude oil prices recovered amid heightened anxiety about a US-led war against Iraq.
Iraq's parliament began an emergency session to decide on a tough new United Nations resolution calling on Baghdad to disarm or face possible military action.
Also doing well were relatively defensive blue chips such as French multi-utility Suez and German utility group E.ON, which also publishes its results later this week, together with French cosmetics group L'Oreal.
Elsewhere, shares in Invensys fell 8.6 per cent as some investors speculated that economic weakness could further subdue demand in the UK engineering group's key markets.
Invensys reports its first-half results on Thursday, having warned in September that its earnings would be at the lower end of expectations.
Shares in KPN rose 6.55 per cent ahead of the Dutch telecom group's third-quarter results on Friday, with investors expecting to see a jump in core earnings thanks to a drastic restructuring of the once-troubled firm.