European shares lost some ground on Tuesday after a rally in the previous session, as falls for euro zone banks and telecoms stocks countered optimism from a stimulus plan for the European Union.
After rising as much as 0.5% at the open, the pan-European STOXX 600 gradually shed gains to close 0.6% lower.
Euro zone stocks also fell 0.7%, despite an early boost from France and Germany's calls on Monday for the creation of a 500 billion ($547 billion) euros recovery fund to offer grants to EU regions and sectors hit hardest by the pandemic.
Investors locked in gains after hopes of a potential COVID-19 treatment had driven the STOXX 600 to the biggest single-day gains since March 24 in the previous session.
Telecoms stocks led sectoral declines, as shares in Telecom Italia fell 8.6% after Italy's biggest phone group gave no guidance on its 2020 core profit target as it reported a drop in first-quarter earnings.
Banking-heavy Spanish and Italian bourses led regional declines with a 2.5% and 2.1% fall respectively, with some analysts pointing to the lifting of short-selling ban across six EU states hitting shares of euro zone lenders.
Shares in Banco de Sabadell tumbled 11.9% and Bankia dropped 11%, while Italian lender Banco BPM fell 7.3%.
However, wealth manager Julius Baer rose 5% as it saw a spike in trading volumes boost its first-quarter margins, even though a strong Swiss franc ate into assets under management.
Automakers struggled after data showed European passenger car sales saw a record drop in April, the first full month with restrictions imposed to contain the pandemic across the continent.
UK stocks were also hit as shares in tobacco group Imperial Brands tumbled 6.5% after its plans to cut its dividend by a third, and a profit warning due to the coronavirus crisis.
Norwegian fish farmer SalMar jumped 9.3% after it reported first quarter operating EBIT above estimates and maintained its 2020 harvest expectations. Shares in peers Grieg Seafood and Mowi rose 5% and 2.9%, respectively.
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