European shares fell yesterday, as Aegon and Commerzbank led financials down and as central banks stood still on interest rates, dashing investor hopes for a monetary stimulus to boost the economy.
Insurance and bank shares were among the worst performers while media stocks slipped as investors pocketed their profits after a recent run of strong gains.
The European Central Bank left its benchmark rate unchanged at 2.5 per cent, defying rising speculation that a strong euro and grim economic data would prompt it to make a cut.
"I am disappointed they haven't cut interest rates as the macro case for it is very compelling," said Ken Wattret, chief eurozone economist at BNP Paribas.
"That means my expectations are simply rolled over. I expect them to deliver at the next, June, meeting as the data between now and then will cement the case."
Meanwhile, the Bank of England left its key rate at a 48-year low of 3.75 per cent, defying a slim majority of economists who expected a cut.
The euro retested four-year peaks against the dollar after the ECB's decision to keep interest rates unchanged, fuelling worries that the strong single currency was hurting companies that make part of their sales in dollars but report in euros.
By 1545 GMT with only the Frankfurt market still officially trading, the FTSE Eurotop 300 index of pan-European blue chips was off 2.39 per cent at 809 points while the narrower DJ Euro Stoxx 50 index shed 2.74 per cent at 2,292 points.
Some strategists said the markets were merely pausing for breath after a sharp rally that lifted European stocks by more than 20 per cent from a six-year trough in mid-March.
But others warned there was little room for further gains amid persistently weak macroeconomic data.
London's FTSE-100 closed off 1.6 per cent and in Paris the CAC-40 finished below the psychological level of 3,000 points, having lost 2.8 per cent in the session.
On Wall Street, the Dow Jones industrial average gained 0.2 per cent while the tech-laden Nasdaq Composite slid 0.4 per cent.
Aegon, one of the world's top 10 insurers, fell six per cent after Credit Suisse First Boston downgraded its rating on the Dutch stock to "neutral" from "outperform" on valuation grounds.
Germany's Commerzbank was another decliner, off 7.2 per cent after private bank Sal. Oppenheim said it had downgraded the stock to "underperform" from "neutral" because it did not believe the bank could sustain an upturn in its business.
Commerzbank reported a surprise net profit on Wednesday and said it was confident it would show a profit for the full year, but some analysts warned the seasonally strong trading income was unlikely to be repeated in the course of the year.
ABN Amro lost five per cent after financial services company ING said it would sell a five-per cent stake in the top Dutch bank to cut its exposure to the stock market and strengthen its capital.
Britain's Barclays was another big financial faller, off 4.2 per cent after it agreed to buy Spain's Banco Zaragozano for 1.143 billion euros to broaden its retail and commercial banking operations.
In the media sector French advertisers Publicis and Havas shed more than six per cent each as investors locked in some profits after a three-session buying spree that had propelled the stocks 13-15 per cent higher, traders said.
Elsewhere, Sweden's Securitas, the world's biggest security services group sank 14 per cent after it posted January-March profits below forecasts and downgraded its full-year profit outlook.