A modest New Year rally quickly fizzled out on Friday after subdued manufacturing data from the euro zone and muted trading.
The pan-European FTSEurofirst 300 index was down 0.5 per cent by 0909 GMT, with benchmark indexes in France, Germany and Britain all reversing early gains after a survey showed euro zone output, new orders and employment all recorded sluggish growth at the end of 2014.
French factory activity shrank at the fastest rate for four months in December and Italy’s at the fastest in 19 months.
Although all national bourses were open except Switzerland and Hungary, traders said quiet trade exaggerated price swings.
“Markets have taken a turn for the worse, with the French and Italian data worse than expected,’’ Sanlam Securities' head of execution trading, Mark Ward, said.
“But volumes are almost non-existent ... I don't think any people would want to open up any positions now heading into the week-end,’’ he said.
Markets had gained ground after the European Central Bank (ECB) fanned expectations that it would take bolder steps on stimulus this month, driving the euro down to its lowest in 4-1/2 years.
That prospect had helped European shares post an annual gain for 2014, with pan-European equity indexes ending Wednesday in positive territory after a turbulent year.
Among standouts, Royal Bank of Scotland was down 1.8 per cent after The Times newspaper reported the lender might face fines over the sale of toxic mortgage-backed debt in the US of more than £5 billion ($7.76 billion). The bank declined to comment.
Elsewhere, BG Group shares rose after news it had received $350 million from the Egyptian government for outstanding debts.