European shares fell in early trade on Monday, led lower by mining stocks that tracked a decline in metal prices, while carmakers Porsche and Volkswagen slipped after stopping merger talks. At 0819 GMT, the FTSEurofirst 300 index of top European shares was down 0.3 percent at 837.24 points, following losses on Wall Street on Friday and in Japan on Monday.
The index lost 3 percent last week, but is up more than 29 percent from the lifetime low it hit on March 9.
"The market is drifting back towards risk aversion after a strong run," said Bernard McAlinden, investment strategist at NCB Stockbrokers, in Dublin.
"It's harder to sustain the rally at higher levels in the market. It's not that the economic data is any worse but the valuations are more demanding. Investors are saying 'Show me the recovery.'"
Miners were lower, tracking weaker metal prices.
Anglo American, Antofagasta, BHP Billiton, Rio Tinto and Xstrata fell between 2.1 and 4.7 percent.
However, Vedanta bucked the trend, rising 3.7 percent. Analysts welcomed election results in India, where Vedanta has the majority of its operations.
The Indian election result was "a big positive surprise," said analysts at Deutsche Bank in a note.
"The political platform thus delivered to the Congress party now raises huge expectations on the roadmap and velocity of economic reform disinvestment, increasing foreign direct investments, pension and insurance sector reforms."
"We believe the verdict is one of those rare instances which justify a rerating of the Indian equity market," the bank said. Oils fell, reacting to the sharp slide in crude prices on Friday. Total, ENI, BP and Royal Dutch Shell fell between 0.9 and 1.9 percent.
Cairn Energy which has interests in India, rose 2.7 percent.
Lloyds Banking Group rose 6.5 percent, after announcing on Sunday that chairman Victor Blank will retire in 2010.
"With the Lloyds takeover of HBOS looking like the worst deal, after RBS ABN-AMRO, in British corporate history, it can be no surprise that the architect of the deal, Victor Blank was going to carry the can. Early trading has shown the markets are glad to see the back of him," said Manoj Ladwa, senior trader, at ETX Capital.
PORSCHE FALLS
German sportscar maker Porsche fell 6.5 percent after Volkswagen halted merger talks between the two companies. Volkswagen was down 1.6 percent.
Pharmaceuticals were higher, led by GlaxoSmithKline, up 1.6 percent after taking another step to bolster its early-stage pipeline of cancer drugs by signing a deal worth up to $370 million with privately held British biotech group Oxford BioTherapeutics.
Across Europe, Britain's FTSE 100, Germany's DAX and France's CAC-40 were between 0.8 and 1.6 percent lower.
Japan's Nikkei fell 2.4 percent to its lowest close since May 1. Exporters such as Sony Corp sank as the yen advanced against the dollar.
Panasonic Corp dropped 7.6 percent after it forecast a bigger-than-expected annual loss following a record quarter of red ink, battered by weak demand, price falls and restructuring costs.
