European shares fell back from a six-month high on Monday, with investors worried about whether Greece can avoid a messy default as its politicians struggle to agree austerity measures needed to secure a bailout package.
Greece's coalition parties must tell the European Union on Monday whether they accept the painful terms of a new bailout deal as EU patience wears thin with political dithering in Athens over implementing reforms.
At 9:27 a.m., the FTSEurofirst 300 <.FTEU3> index of top European shares was down 0.7 percent at 1,069.68 points, after hitting a six-month high on Friday, when data showed many more jobs being created in the United States than expected, boosting optimism about the recovery in the world's biggest economy.
Uncertainty about Greece is pushing investors to take a bit of profit, said Michael Hewson, market analyst at CMC Markets.
We've had a really big rally since the beginning of January. We've seen a big sell-off in the banking sector this morning, which is not surprising, given French banks' exposure to Greece.
The STOXX Europe 600 euro zone Banking Index <.SX7E> lost 2 percent. French banks BNP Paribas
The euro zone remains a major uncertainty. It has the potential to unravel everything in the event of a disorderly default in Greece, said Jeremy Batstone-Carr, strategist at Charles Stanley.
What hasn't been priced in is a continuation of the crisis in other countries. Were Spain and Italy to come under further pressure, there would be scope for the market to weaken quite significantly.
The pan-European FTSEurofirst 300 index is up more than 25 percent from the 2011 low it hit in September, but is still 10 percent down from the February 2011 high.
The surge has pushed up valuations, with the STOXX Europe 600 <.STOXX> carrying a forward P/E ratio of 10.2, according to Thomson Reuters datastream.
But Batstone-Carr said weak earnings might pull down share prices. We're seeing multiples (such as P/Es) expanding on the basis that everything is rosy, but earnings are under pressure from results season.
Of 275 companies in the STOXX 600 <.STOXX> expected to report fourth-quarter earnings, 22 percent have done so. Of those, 54 percent have missed forecasts, according to Thomson Reuters StarMine data.
Wall Street has outperformed Europe in the last year, partly due to stronger economic indicators, such as GDP growth and labour data. The Dow Jones industrial average <.DJIA> is near a four-year high.
The Standard & Poor's Index <.SPX> looks more expensive than the European index, trading at around 12.4 times, though U.S. earnings have come on stronger.
Technically, the FTSEurofirst 300 index may be ripe for a pull-back, with its 14-day Relative Strength Index having risen above 69 on Friday. Values of 70 and above are considered to indicate overbought' territory by technical analysts.
Among individual companies, Randgold Resources
Airlines saw their stocks fall after they had to cancel flights. London's Heathrow Airport cut around half of the 1,300 flights scheduled for Sunday after snow and freezing temperatures hit much of England.
International Airlines Group