European shares fell on Tuesday following disappointing results from bluechips Ericsson and Lufthansa, while scaled-back expectations of monetary tightening by major central banks spurred some profit-taking in financials.

The pan-European STOXX 600 was down 0.3 per cent as the basic resources sector fell more than 1 per cent.

Ericsson dropped 11 per cent after cutting its forecast for the mobile infrastructure market and reporting a wider than expected loss, a further blow to a company that is undertaking cost cuts.

“A more challenging market and consensus estimates likely to fall significantly for 2017, we believe, will weigh,” said UBS analysts.

Nokia shares fell 2.9 per cent as investors read across to the Finnish mobile equipment maker.

Slower rate of tightening

Banks were down 0.5 per cent, after comments from Federal Reserve and European Central Bank policymakers that pointed to a slower rate of tightening on both sides of the Atlantic than many investors were expecting.

Zalando weighed on the retail index after it reported slowing sales growth. Europe's biggest online-only fashion retailer said capacity issues at new warehouses held them back.

Zalando launched a loyalty program, Zalando Zet, which analysts at Baader Helvea said was its answer to Amazon Prime.

The broader euro zone earnings picture was expected to weaken slightly in the third quarter as analysts see a stronger currency likely weighing on the bloc's large exporting companies.

“We do think that the scope for earnings to beat expectations has been reduced due to the currency headwinds - historically euro weakness has provided a driver for earnings beats and with that removed, expectations may be more difficult to surpass,” said Edward Park, investment director at Brooks Macdonald.

German airline Lufthansa fell 2 per cent from 10-year highs, the worst DAX performer, despite upping its profit forecast after a bumper summer of bookings.

Traders had expected the stock to rise 1 to 2 per cent. Analysts at Liberum said cautious second-half comments from management might explain the move lower.

UK peers International Consolidated Air and EasyJet were among top FTSE 100 losers.

Norwegian fertiliser company Yara fell 4 per cent after its quarterly earnings were dented by a squeeze in margins.

“We believe this has been Yara's darkest quarter and see an improving trend with urea prices ticking up in the U.S. and Egypt recently,” said Liberum analysts.

Among shares boosting the index, British spread-betting firm IG Group was up 8 per cent, leading gainers after reporting an increase in annual profit that beat analysts' estimates.

Britain's second largest listed property developer British Land jumped 2.7 per cent and was among the top performers on the STOXX 600 after announcing a 300 million pound share buyback.

Analysts at Morgan Stanley had last week predicted European share buybacks would accelerate as corporates react to a happy combination of better economic growth and solid balance sheets.

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