European equities were lower by midday on Monday as investors took profits from nine-month highs in the previous session, with oils tracking weaker crude prices and banks losing ground after recent sharp gains.
Analysts said the market was expected to trade in a wide range during the current European summer vacation season, but overall trend remained positive following better-than-expected earnings results and encouraging macroeconomic numbers across the globe.
At 1044 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 percent at 944.79 points after surging 1.3 percent in the previous session to hit its highest closing level in more than nine months.
The benchmark index ended higher for a fourth straight week on Friday and, despite Monday's losses, is up 46 percent since hitting a lifetime low in March. It slumped 45 percent in 2008.
"Looking to the coming weeks, seasonal aspects suggest that the much more bullish sentiment recently will be subjected to a brief test once the predominantly positive impulses from the second quarter reporting season run their course," said Gerhard Schwarz, head of global equity strategy at UniCredit.
"Setbacks should, however, remain moderate and short lived. We continue to recommend exploiting setbacks to increase equity exposure," he added.
Banks were among top losers, with Lloyds falling 3.8 percent on a report in The Sunday Times that the bank may consider a multi-billion pound share issue as part of a partial withdrawal from the government's asset protection scheme.
Other banks also fell, with HSBC, Barclays, Royal Bank of Scotland, BNP Paribas and Societe Generale down 0.7 to 4.3 percent.
Energy shares dropped after crude fell 0.3 percent. Royal Dutch Shell, BG Group, Total and StatoilHydro shed between 0.3 and 1.2 percent.
"Maybe this morning, it's just profit taking. We are in the middle of a vacation period and may not see a significant movement in the coming days," said Chicuong Dang, equity analyst at Richelieu Finance.
"Most of the earnings results have been announced and the market will now focus on macroeconomic numbers."
ECONOMIC INDICATORS
A slew of economic data and reports from across the world revived hope that the market has seen the worst phase of the credit crisis since the Great Depression of the 1930s and should be on a gradual recovery path.
Goldman Sachs raised its forecast of China's gross domestic product (GDP) growth for 2009 to 9.4 percent from 8.3 percent, while Morgan Stanley said the U.S. car market had bottomed and looks poised for a very strong rebound.
French industrial output rose more strongly than expected in June as auto output rose, and a Bank of France survey pointed to prospects of a slight pick up in industry.
The Confederation of British Industry's July Access to Finance Survey showed that British firms had an easier time getting credit in the last three months.
Schwarz of UniCredit said that the price to earnings (P/E) valuation of the STOXX 600 companies had moved back into the range of 12 to 13.5, established prior to the financial crisis. He said there was potential for further expansion, indicating a continuation of the upward move on the equity market.
UK life insurer Friends Provident rose 7.7 percent after the company said it had agreed to talks with suitor Resolution following a revised takeover offer valuing it at almost 1.9 billion pounds ($3.2 billion).
Around Europe, Britain's FTSE 100, Germany's DAX index and France's CAC 40 fell between 0.5 and 0.7 percent.
"The momentum for equity markets remains to the upside but there still exists a risk of consolidation this week," Joshua Raymond, market strategist at City Index said in a note.
"After such a strong run, we may find the markets heading sideways a little, but … traders are looking for buying opportunities and may use any dips to buy back into the market."
