European blue-chips fell yesterday after poorly received results from German chemicals titans BASF and Bayer eclipsed a consensus-beating profit from Britain's Barclays.
Insurers also retreated, but energy stocks, benefiting from a rise in oil prices, eked out gains.
Trading volumes were light as some market participants headed off for summer holidays and the flood of corporate results slowed a touch.
While European companies have so far have largely met or bettered estimates this reporting season, analysts said the hefty cost-cutting that has driven earnings cannot go on forever.
"I also think the good results were needed to be able to support the rise we have seen in stock prices since March, for us to be able to say that these valuations are justified," said Swiss analyst Steven Frey at Bank Leu.
Cautious company growth forecasts are now tempering enthusiasm for stocks, and the oft-seen market decline in September or October cannot be ruled out, Mr Frey added.
"If you take a look at the outlook statements from tech companies and cyclical companies, they are not that optimistic. They are not seeing the recovery that people are talking about."
By 1335 GMT, the pan-European FTSE Eurotop 300 index was down 0.2 per cent at 858 points, while the DJ Euro Stoxx 50 index shed 0.3 per cent to 2,430 points.
Frankfurt again bore the brunt of the selling, falling 1.5 per cent and taking its losses in the past five sessions to around five per cent.
In New York, US stocks opened flat despite encouraging data about the recovery in the world's largest economy.
The Dow Jones industrial average was down 0.1 per cent at 9,053, while the Nasdaq Composite was flat at 1,652.
US businesses boosted their productivity by 5.7 per cent in the second quarter, while jobless claims last week fell to their lowest level since February, the data showed.
"We are waiting for more important data next week, including US retail sales, industrial production, consumer confidence, and the Fed policy meeting on Tuesday," ING global economist James Knightley said.
Shares in Germany's BASF, the world's top chemicals company by sales, dropped 5.6 per cent after the company said it would struggle to match last year's earnings.