Disappointing third-quarter results from Bank of America and General Electric and weak US consumer sentiment survey dragged European shares lower on Friday from a one-year high.
The FTSEurofirst 300 index closed 0.8 per cent lower at 1,009.62 points after trading as high as 1,026.43 in the morning session - its highest level since October 7, 2008.
But results from Bank of America and US conglomerate General Electric countered the positive momentum created by IBM and Google's earnings figures overnight.
"The bar has been raised. You could have effectively announced poor results in Q2 and then the stock would be up five per cent," said Robert Quinn, European strategist at Standard & Poor's equity research in London.
Across Europe, Britain's FTSE 100 lost 0.6 per cent, and both Germany's DAX and France's CAC 40 dropped 1.5 per cent.
Financials were the top losers in Europe, with Deutsche Bank , Commerzbank, BNP Paribas, Société Générale and HSBC falling two to three per cent.
Bank of America posted a wider- than-expected third-quarter loss as an improvement in its Merrill Lynch investment banking unit failed to offset consumer credit woes, while General Electric's revenue missed market expectations.
A Reuters/University of Michigan Surveys of Consumers report also weighed on the market. It showed US consumer sentiment fell unexpectedly in October on persistent worries that the "dismal" state of personal finances would not recover quickly from the worst recession in decades.
"Final demand within the US economy and within the European economy hasn't really caught up with expectations pricing in the equity market," Quinn said.
The index, which slumped 45 per cent last year, is up 21.4 per cent in 2009 and has surged more than 56 per cent since hitting a record low in early March, driven by low valuations and signs of improving economic data.
But the sharp rally has raised questions whether it has gone too far, too fast, while the recovery remains patchy.
"We're still in an upward trend on the market, but it won't last unless we see companies' revenues starting to rise again. And it's not the case for now," said Jacques Henry, analyst at Louis Capital Markets, in Paris. Concerns over corporate earnings and the strength of the economic recovery also took the shine off mining shares as well as raw material prices.
BHP Billiton, Rio Tinto, Anglo American, Xstrata, Vedanta Resources and Eurasian Natural Resources lost between 0.4 and 2.4 per cent.
Heavyweight oil producers held on to earlier gains, despite crude prices reversing to trade down in the afternoon. BP, Royal Dutch Shell and Total advanced 0.6-1.7 per cent.
Sweden's Ericsson gained two per cent after mobile phone maker Sony Ericsson, owned by Ericsson and Japan's Sony Corp., posted a smaller-than-expected third-quarter pretax loss, boosted by big cost cuts.
Among other individual movers, tobacco maker Swedish Match surged 3.8 per cent, with traders citing market talk of bid interest from Philip Morris. Swedish Match declined to comment.
Norwegian fertiliser producer Yara International put on 2.7 per cent, hitting a four-week high, as fertiliser prices rose and brokers lifted ratings.