European shares fell in early trade on Friday, after a five-day winning streak, as weaker-than-expected Chinese economic data caused equity markets to retreat from levels that were close to their 2012 peaks.
The FTSEurofirst 300 index fell 0.4 per cent to 1,097.14 points, having risen 0.5 percent on Thursday to close near a 2012 intraday peak of 1,109.18 points reached on March 16.
The Euro STOXX 50 index fell 0.6 per cent to 2,421.55 points.
Equity markets rallied sharply after European Central Bank head Mario Draghi said on July 26 that the ECB would do "whatever it takes" to protect the euro from the region's debt crisis, which has seen several countries need bailing out.
But many traders have recommended selling shares on the back of the rally to book profits, due to the underlying weak global economic backdrop and the persistent risk that Europe's leaders will fail to agree on concrete measures to tackle the crisis.
"I would advise caution over buying right now," said Francois Savary, chief investment officer at Swiss bank Reyl, who prefers emerging market equities to European ones.
Chinese trade data published on Friday showed that China's July exports rose just 1 per cent from a year earlier, undershooting forecasts by a big margin.
Equity markets have been buoyed by expectations that a series of weak economic data in Asia, Europe and the United States could spur central banks into fresh monetary stimulus measures.
However, the timing of any such moves remains uncertain and the Euro STOXX Volatility Index - a gauge of investors' uncertainty - edged up 2.2 per cent.
German reinsurer Hannover Re was the worst-performing stock on the FTSEurofirst 300 index, falling 5.1 per cent after its second quarter results came in below market forecasts.
German bank Commerzbank was also among Europe's worst-performing blue-chip stocks, falling 2.9 per cent after being hit with downgrades from DZ Bank, Nomura and Societe Generale.
The declines in Hannover Re and Commerzbank contributed to Germany's DAX index falling 0.6 per cent to 6,923.55 points.
Central Markets senior broker Joe Neighbour said his firm had taken up "short" positions on the DAX this week to bet on future falls on the index.
"We might be in for a little bit of a stalling on the DAX. It appears to be encountering resistance at around the 7,000 point level," said Perry.
Other technical analysts have also said the FTSEurofirst tends to be sold off at around the 1,100 point mark - a level which sparked similar sell-offs in March 2012, July 2011, November 2010, and April 2010.
Reuters