European shares snapped a four session winning run on Thursday, as bank stocks drew close attention after sources said Italy's UniCredit was interested in buying Germany's Commerzbank.
The pan-European STOXX 600 index fell 0.3 percent, as most sectors ended in negative territory, giving back a sliver of the 3.2 percent gained largely on strong Chinese economic data and hopes of a U.S.-China trade deal during the past four sessions.
Banking stocks were among the rare gainers on the day with a 0.2 percent rise.
Commerzbank gained 2.8 percent to lead the sector index after sources said there was buyout interest from Italian lender UniCredit if Commerzbank's talks with Deutsche Bank AG break down.
RBC Capital Markets analysts wrote in a note they would prefer UniCredit's management to focus on the continued de-risking of its non-core portfolio and cut costs "rather than embark on a complex deal that is likely to distract it from its current plan".
Milan-traded UniCredit shares dipped 0.7 percent, while Deutsche Bank fell 0.8 percent. Some analysts said UniCredit's interest ramped up pressure on the German banking giant to move forward on a tie-up with Commerzbank.
"Unicredit is in alright shape for a euro zone bank, but given that profit margins are low in the already oversaturated German banking sector, some traders are wondering, would it be a wise move," wrote David Madden, a market analyst at CMC Markets UK.
Lloyds Banking Group slid 3.5 percent as it traded ex-dividend, hindering further gains on banking index.
Italian stocks fell 0.2 percent on the day, with sentiment clouded by a report the country's government will cut its 2019 economic growth forecast.
Basic resources stocks slid 1.3 percent to snap a seven session winning streak as they gave up much of Wednesday's 1.8 percent rise.
Sentiment was crimped by German data showing an unexpected drop in industrial orders in February on a slump in foreign demand. The country's leading economic institutes also cut their forecasts for 2019 growth in the euro zone's top economy by more than half.
Industrial goods and services stocks slid 0.4 percent with Thyssenkrupp dropping 1.3 percent.
A top-20 investor said the slide in the Germany firm's share price could necessitate changes to a planned breakup of the conglomerate and even delay the move.
Insurers dipped 0.2 percent from a 14-month peak hit on Wednesday.
Meanwhile, specialist tourism and insurance firm Saga , which is outside the insurers' index, cut its profit forecast and said older Britons were cutting back on their travel plans because of Brexit, sending its shares down 37 percent.
Weakness in oil prices seen for most of the day pressured oil and gas stocks, which fell 0.8 percent.