European shares retreated from a two-week closing high the previous session, with UK lenders pressured by the possibility of a tax on bankers' bonuses.
At 0904 GMT, the FTSEurofirst 300 index of top European shares was down 1.2 percent at 1,013.77 points. It gained 1.1 percent on Friday after data showed U.S. employers cut far fewer than expected jobs in November.
"The consequences of better-than-expected employment data are that the interest rates are going to go up. What we saw was great for the economy, but it's not so great for the stock market," said Koen De Leus, economist at KBC Securities.
Banks were among the top losers. A UK government source told Reuters on Friday a windfall tax on banks was one revenue-raising option being considered by finance minister Alistair Darling for his pre-budget report on Wednesday.
Standard Chartered, HSBC, Barclays, Lloyds, Royal Bank of Scotland, BNP Paribas and Societe Generale fell 0.4 to 2.7 percent.
Energy stocks also slipped as crude prices fell 0.5 percent. BP, Royal Dutch Shell, BG Group, Tullow Oil, Repsol, Total and StatoilHydro shed 0.6 to 1.6 percent.
A broad sell-off in the market put pressure on drugmakers. AstraZeneca, GlaxoSmithKline, Merck, Novo Nordisk, Roche Holding , Sanofi-Aventis and Shire fell 0.6 to 1.9 percent.
Across Europe, Britain's FTSE 100 index, Germany's DAX and France's CAC 40 fell 0.8-1.1 percent.
RISK APPETITE FALLS, COMMODS SLIP
Investor appetite for risky assets such as equities fell, with the VDAX-NEW volatility index rising 5 percent. The higher the index, which is based on sell and buy options on Frankfurt's top-30 stocks, the lower the market's desire to take risk.
"The much better than expected non-farms (data) on Friday didn't give us as much bounce as you would have thought, indicating how far we have travelled in the last six months and just how nervous market traders are," said Brian Myers, analyst at odlmarkets.com.
"The sensitive underbelly to the markets remains intact for the time being," he said.
Miners slipped as gold fell to its lowest level in more than a week after setting a record high last week, copper fell 1.7 percent, aluminium was down 1.2 percent and zinc fell 3 percent.
Anglo American, Antofagasta, Xstrata and Eurasian Natural Resources declined 1.2 to 2.3 percent.
BHP Billiton and Rio Tinto fell 1.2 percent and 1.7 percent respectively. BHP and Rio on Saturday signed a $116 billion iron ore joint venture agreement to combine their Western Australian iron ore operations. The agreement brings together two of the world's three largest iron ore producers, and has upset major customers in China. However, it still faces substantial hurdles, in particular approval by the European Commission, due to concerns about excessive dominance of the iron ore market.
Heineken NV, the world's third-largest brewer, was down 0.5 percent. It has agreed a deal to brew and sell its own brand beer in India and will integrate its various other operations in the Asia Pacific region. ID:nLL631571
The European index is still up 22 percent this year and has surged 58 percent since hitting a record low in early March.
