European shares reversed early gains on Tuesday as a drop in shares of banks and downbeat economic data from the region outweighed support from robust earnings from companies such as luxury giant Hermes.
The pan-European STOXX 600 index (.STOXX) was down 0.3% by 0835 GMT.
Barclays dropped 6.8% after the British lender hinted at major cost cutting later this year and warned competition for savers' money was eating into its margins.
Shares of rivals Lloyds (LLOY.L) and NatWest (NWG.L) fell 2.5% and 3.3% respectively, dragging Europe's banking sector (.SX7P) down 1.3%.
"We are in a situation where banks are going to have to think hard about the cash they set aside for debt. So generally the banking sector is in quite a tough situation at the moment," said Danni Hewson, head of financial analysis at AJ Bell.
Spurring concerns about a recession, data showed the euro zone Composite Purchasing Managers' Index (PMI) fell to a near three-year low in October, while business activity in Germany contracted for a fourth straight month.
"We're seeing the impact of increased borrowing costs in the fact that business activity in Germany has contracted again, so (there's) a real expectation that a recession is well underway, certainly in that part of the eurozone," said Hewson.
While investors are expecting global central banks to refrain from raising interest rates further, they are awaiting key U.S. economic growth data later in the week to gauge how long the Federal Reserve could hold rates.
Concerns about an escalating Middle East conflict have also kept high-risk equities under pressure, pushing the STOXX 600 to multi-month lows.
Limiting declines on Tuesday, Hermes (HRMS.PA) rose 1.3% as the Birkin bag maker beat third-quarter sales estimates, defying a slowdown in the broader luxury sector.
Puma shares (PUMG.DE) rose 3.7% after the German sportswear brand stood by its full-year profit forecast despite a drop in third-quarter earnings.
Logitech International (LOGN.S) jumped 8.9% after lifting its full-year guidance.
Miners (.SXPP) were a bright spot, up 0.9%, as prices of base metals ticked higher.
Shares of IT services firm Softcat (SCTS.L) slumped 10.2% on a decrease in its full-year revenue.
Industrial firms were also a big drag on Tuesday, with Britain's Bunzl (BNZL.L) down 4.5% after warning of a drop in full-year revenue.
