LONDON: European shares fell into negative territory on Monday, giving up earlier gains as lingering worries about the euro zone economy, Brexit and the U.S. government shutdown offset hopes for a truce between Washington and Beijing over trade.

The pan-European STOXX 600 was down 0.5 percent at 1004 GMT, erasing some of Friday's stellar gains after strong U.S. jobs data and dovish comments from the Federal Reserve chief.

Optimism about easing friction between the United States and China had also lifted the mood, helping the index to its biggest daily gain since June 2016.

The swift swing into negative territory on Monday morning illustrated the fragility of the gains as other worries returned to the fore.

The biggest gainers in Friday's strong rally were some of Monday's laggards, with healthcare and food and beverage stocks falling 1.1 percent. The weaker U.S. dollar also weighed on those companies with large international revenues..

Blowout U.S. data and Fed comments had "calmed some nerves" and provided some psychological support to the market, said Lars Kreckel, global equity strategist at Legal & General Investment Management.

On Friday, Powell said the Fed is not on a preset path of interest rate hikes and that it will be sensitive to the downside risks markets are pricing in.

"We're not seeing the overheating of the U.S. economy that we were worried about," said Kreckel.

Still, European equities remain out of favour, particularly after business surveys last week pointed to slower growth.

On Friday, Bank of America Merrill Lynch's "Bull & Bear" gauge of market sentiment has fallen to 1.8, a level the U.S. bank's strategists described as "extreme bear" territory that has triggered a "buy" signal for equities.

Sectors sensitive to the trade tensions were among the few gainers, with basic resources stocks up 0.4 percent and technology up 0.5 percent.

Chipmakers were also recovering from heavy losses last week after Apple's shock revenue warning. AMS which supplies the iPhone maker, was up 8 percent, topping the STOXX 600 after the chipmaker announced a partnership with Face++. The shares lost almost a quarter of their value on Thursday.

Broker research moved other stocks, with Dutch payments firm Adyen among the top gainers after BAML upgraded it, while Wirecard was up 1.8 percent after BAML also backed it.

On the downside, Centrica fell 3.9 percent after a Jefferies downgrade.

A JP Morgan downgrade pushed tyre makers and auto parts makers Pirelli, Michelin, Gestamp lower, adding further gloom to the industry knocked by regulation and slowing Chinese sales.

The bank said it reckons the European autos are unlikely to re-rate in the first half of the year.