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London - Europe's main stock markets fell on Monday, reversing early gains won on the back of banks' stress test results, as disappointing German business confidence data highlighted renewed eurozone strains.
London's benchmark FTSE 100 index slipped 0.37% to stand at 6 365.22 points in late morning deals.
Frankfurt's DAX 30 dropped 0.62% to 8 932.14 points and in Paris the CAC 40 lost 0.60% to 4 104.22 compared with Friday's closing value.
Milan shed 2.16% and Madrid gave up 1.49%.
The euro firmed against other major currencies after a large majority of eurozone banks were given a clean bill of health on Sunday by the European Central Bank, fuelling hopes that a major cause of economic uncertainty could soon be eliminated.
In the most stringent audit of eurozone banks ever undertaken - marking a major reform aimed at preventing a repetition of the crisis that nearly led to the euro's collapse - the ECB found that 25 out of a total 130 banks were short of financial resources.
They had a combined capital shortfall of €25bn ($31bn) at the end of 2013.
However, of those, 12 banks have already since made up €15bn of the shortfall, leaving 13 banks with a hole in their combined balance sheets of around €10bn.
The shares of some Italian banks which failed the tests were hard hit, but analysts said that overall there were few surprises, and there was some profit taking. The Stoxx index of European banks was down 0.64% in late morning trading.
In Germany, were one bank failed, bank shares were firm, and shares in four leading Greek banks rose initially on satisfaction with their overall performance in the tests, although these shares then eased after strong initial gains.
Shares in leading French banks, which passed the tests, fell on profit-taking, dealers said.
In Milan, the shares in two banks which failed the tests, Banca Monte dei Paschi di Siena (BMPS) and Banca Carige, fell heavily but other Italian banks rose sharply.
Shares in BMPS, the third-biggest Italian bank, plunged 17.55% and stock in Banca Carige by 15.68%.
Shares in Portuguese BCP bank, which was found to be short of capital, fell by 3.09 percent.
"While markets look to digest the aftermath of the weekend stress tests and whether they mark a return of confidence in Europe's banking system, the fact of whether they remain more or less credible than previous ones is less important than the fact that loan demand remains non-existent," said Michael Hewson, chief market analyst at traders CMC Markets UK.
"That is likely to remain a problem, given concerns about the long term economic outlook in Europe," he cautioned.
Loans to the private sector in the euro area, a gauge of economic health, fell year-on-year in September, but by slightly less than in August, the European Central Bank said on Monday.
Separate data showed Germany's business confidence fell to the lowest level for nearly two years in October, as the outlook for Europe's biggest economy continues to cloud over.
The Ifo economic institute's closely watched business climate index fell to 103.2 points in October from 104.7 points in September, the think-tank said in a statement.
That is the lowest level since December 2012.
British banks, despite passing their tests as part of a wider EU assessment, were also trading lower.
State-rescued lenders Lloyds Banking Group and Royal Bank of Scotland dropped 2.25 percent and 1.62% to 75 pence and 358.3 pence respectively.
Barclays lost 1.10% and HSBC retreated 0.70%.
In foreign exchange deals, the euro climbed to $1.2684 from $1.2666 late in New York on Friday.
The European single currency edged up to 78.74 British pence from 78.73 pence. The British pound advanced to $1.6108 from $1.6086 on Friday.
On the London Bullion Market, the price of gold fell to $1 230.84 an ounce from $1 235.75.
