Stocks, oil and yields on government bonds all fell on Monday, reversing some of their recent gains as investors began the week in a cautious mood, still grappling with the possibility that U.S. interest rates could soon be raised.
The FTSEuroFirst 300 index of leading shares, Germany's DAX and France's CAC 40 all shed around 0.8%, and Britain's FTSE was down a third of a percent.
Shares in German drugs and chemicals group Bayer AG were among the most notable decliners, down more than 3% after it unveiled a $62 billion bid for U.S. seeds company Monsanto Co.
Investors also took in economic data that showed euro zone private sector growth in manufacturing and services slowing down a little in May, even though Germany continued to power ahead.
U.S. futures pointed to a fall of around 0.2% at the open on Wall Street, as investors continued to digest last week's surge in U.S. rate hike expectations.
"U.S. economic momentum is starting to gather pace in the second quarter. If this can be sustained, the Fed will need to start following through on its words," said Michael Stanes, Investment Director at Heartwood Investment Management.
"Indeed, a failure to act in the event that the Fed stays on hold longer than the underlying data would suggest is likely to increase the risk of a policy error," he said.
Purchasing managers index data showed that euro zone business growth slipped in May to a 16-month low, the latest evidence to suggest a strong acceleration in growth in the first three months of the year was only temporary.
Markit's flash Composite Purchasing Managers' Index, one of the first growth indicators in a month, edged down to 52.9 from April's 53.0, the lowest since the start of 2015.
Germany's private sector growth accelerated in May to the highest level so far this year, but activity elsewhere failed to keep pace.
Earlier in Asia shares mostly rose, with MSCI's broadest index of Asia-Pacific shares outside Japan up 0.3%, but Japan's Nikkei ended down 0.55.
The Markit/Nikkei flash Japan manufacturing PMI showed Japanese manufacturing activity contracted at the fastest pace in more than three years in May, while a slump in Japanese trade and reports that Japan's sales tax increase would indeed be implemented all weighed on the Nikkei.
"In a climate dominated by speculation over monetary policy, PMIs give a solid insight into the state of the 'real' economy and how domestic industries are coping with policy measures, and are not to be ignored," said Ana Thaker, Market Economist at PhillipCapital UK.