A month after AstraZeneca suspended late-stage trials of its vaccine candidate, Johnson & Johnson said it had temporarily halted trials due to an unexplained illness in a study participant.
The pan-European STOXX 600 snapped a three-day winning streak to fall 0.6%, with banks <.SX7P> slumping 2.7% as long-dated sovereign bond yields in Italy and Greece sank to record lows.
Only the telecoms, media and tech <.SX8P> sectors ended the day marginally higher. Still, analysts said the news was unlikely to spark a prolonged sell-off in equity markets.
"With numerous vaccines in the pipeline, this setback might not be viewed too negatively unless the unexplained illness becomes more expensive in other trials," said Stephen Innes, a markets strategist at Axi.
Investors were also digesting mixed signals on more U.S. fiscal aid, with House Speaker Nancy Pelosi saying a recent offer from President Donald Trump fell far short of what the American people need, but added she still hoped a deal could be reached.
The U.S. S&P 500 and the blue-chip Dow indexes lost 0.3%. [.N]
Hopes of more U.S. fiscal aid and signs of an economic rebound have powered European stock markets, helping the benchmark STOXX 600 on Monday to hit its highest close in nearly a month.
Losses on Tuesday were led by German and British mid-cap stocks as data signalled a long road to pre-pandemic economic output.
German investor sentiment fell more than expected in October on a triple whammy of coronavirus, Brexit and U.S. election angst, while in Britain, the unemployment rate rose in the three months to August to hit its highest in more than three years.
"UK unemployment is unfortunately set to rise further on the combined impact of fresh COVID-19 restrictions and the end of the original furlough scheme," said ING economist James Smith.
In company news, Airbus SE fell 3.5% as JPMorgan cuts its rating on the planemaker's stock to "underweight" from "neutral".
British clothing retailer French Connection Group Plc slumped 19.6% in its worst session since March after posting a slump in first-half sales due to the health crisis.
(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Arun Koyyur and Gareth Jones)
By Sagarika Jaisinghani