Weakness from commodity stocks and banks outweighed gains in insurers by midsession Thursday, leaving European shares 0.3 percent weaker as nervousness about the global economy resurfaced.
At 1107 GMT, the FTSEurofirst 300 .FTEU3 index of top European shares was down 0.3 percent at 994.61 points. The index fell 0.5 percent on Wednesday but rose 17.3 percent between July and September, the best quarterly performance in nearly 10 years.
Banks, sensitive to changes in risk appetite, fell with HSBC (HSBA.L), Barclays (BARC.L) and Commerzbank (CBKG.DE) down 0.7-0.9 percent.
Data showing euro zone unemployment rose to 9.6 percent in August, its highest in more than 10 years, added to fears that the nascent recovery might not last.
And German retail sales fell by 1.5 percent on the month in August, official figures showed on Thursday, bucking expectations for a slight rise and suggesting consumers in Europe's largest economy remain cautious.
However, Eurozone manufacturing activity contracted less than first thought in September, a survey from the Eurozone Purchasing Manufacturers Index showed, prompting some analysts to say that the overall recovery theme is still in play.
The European benchmark index was up 54 percent from its lifetime low of March 9.
Nothing has changed to stop the rising trend, the key indicators are still ticking upwards, said Lars Kreckel, equity strategist at Exane BNP Paribas.
The world economy is finally stirring from a deep recession led by a swift turnaround in Asia, the International Monetary Fund said on Thursday, raising its forecast for global economic growth next year.
Investors await key non-farm payrolls data from the U.S. on Friday.
Energy companies fell as crude oil prices CLc1 fell back below $70 a barrel.
Total (TOTF.PA), BP (BP.L), Royal Dutch Shell (RDSa.L) and Repsol (REP.MC) fell between 0.5 and 1.1 percent.
Miners were also in retreat as copper prices fell. Rio Tinto (RIO.L), Xstrata (XTA.L), Lonmin (LMI.L), Anglo American (AAL.L), Kazakhmys (KAZ.L) and Fresnillo (FRES.L) fell 1.8 to 4.4 percent.
Insurers were up. Legal & General (LGEN.L) was up 3.2 percent taking its gain over the past five sessions to more than 20 percent, on persistent takeover speculation. It was also helped by Panmure Gordon raising its price target.
The broker also raised targets for Aviva (AV.L) and Standard Life (SL.L), which rose 1.2 and 2.1 percent respectively.
Munich Re (MUVGn.DE) gained 3.5 percent, after the world's largest reinsurer said it could resume its stock buyback programme.
Across Europe, Britain's FTSE 100 .FTSE, Germany's DAX .GDAXI and France's CAC-40 .FCHI were down between 0.3 and 0.5 percent.
BAE Systems (BAES.L), Europe's largest defence contractor, fell 5.3 percent after Britain's Serious Fraud Office said it intends to seek the Attorney General's consent to prosecute the company on bribery charges.
Norwegian video-conferencing equipment maker Tandberg ASA jumped 11.6 percent after it said major shareholders had voiced support for the $2.98 billion cash bid from U.S. network equipment maker Cisco System (CSCO.O).
Italian vehicle maker Fiat (FIA.MI) gained 7.1 percent after Morgan Stanley doubled its price target to 16.80 euros, from 8.30 euros, citing prospects for its tie-up with Chrysler.