European stocks lost ground in early trade on Monday, slipping from 8-month highs hit last week as investors waited for more evidence of improvement in the economies of Europe and the United States before chasing the market's brisk 2-month rally.
Dutch delivery firm TNT bucked the trend, rising 1.9 percent after UPS agreed to sweeten its takeover offer, representing a 53.7 percent premium over TNT's closing price the day before the companies announced they were in talks.
At 0909 GMT, the FTSEurofirst 300 index of top European shares was down 0.4 percent at 1,102.42 points, while the euro zone's blue chip Euro STOXX 50 index was down 0.6 percent at 2,593.41 points.
We're getting very close to a period of consolidation and retracement. The DAX has hit its target in the zone of 7,150 points, while other indices have an upside potential of less than 2 percent before they enter in a phase of consolidation, Aurel BGC technical analyst Gerard Sagnier said.
The chart analyst sees the Euro STOXX 50's next support at 2,590 points, followed by a major support level at 2,550 points, while crossing below 2,385 points would invalidate the index's recent sharp rally.
Banking shares, which have surged 40 percent from a low in late November, were among the top losers on Monday, with Intesa SanPaolo down 1.5 percent, Deutsche Bank down 1.8 percent and Barclays down 1.8 percent.
The Euro STOXX 50 volatility index, Europe's main barometer of anxiety known as VSTOXX index, jumped 7.5 percent to 19.9, after hitting a four-year low on Friday.
Between the IMF saying the crisis is abating and the triggering of Greek CDSs, very few analysts have a clear opinion today, said Guillaume Dumans, derivatives trader and co-head of 2Bremans, a Paris-based research firm using behavioural finance to monitor investor sentiment.
Our daily indicator shows the bull/bear ratio in extreme' zone, so we favour a 'neutral' stance for the session, he said, referring to a large number of bulls versus bears in the market.
The International Monetary Fund Managing Director Christine Lagarde said in a speech in Beijing over the weekend that the world economy has stepped back from the brink of danger and signs of stabilisation were emerging from the euro zone and the United States, but high debt levels in developed markets and rising oil prices were key risks ahead.
Later on Monday investors who bought default insurance - credit default swaps (CDS) - on Greek bonds will find out how much they will be paid.
Those who bought insurance via CDS contracts stand to get a cash settlement that compensates them for the loss in face value on the bonds, with a total net payout that could be around $2.5 billion.
Around Europe, UK's FTSE 100 index was down 0.6 percent, Germany's DAX index down 0.7 percent, and France's CAC 40 down 0.8 percent.
The retreat was broad-based, with both cyclicals and defensives taking a hit. Big pharma Sanofi was down 0.9 percent, Siemens down 1 percent and Daimler down 0.9 percent.