The pan-European STOXX 600 benchmark <.STOXX> dropped 0.4 percent, falling for a second session, while euro zone stocks <.STOXXE> and blue-chips <.STOXX50E> followed suit.

The greatest downward pull came from healthcare stocks. Swiss drugmaker Roche (>> Roche Holding Ltd.) fell 4.5 percent after investors were disappointed by findings in its Aphinity study for a key breast cancer treatment.

Analysts at Liberum said they believed the study, which showed a lower than expected measure of improvement in disease free survival with Roche's treatment, could make clinical acceptance more difficult.

Medical products company Convatec (>> ConvaTec Group PLC) also fell 4.8 percent after shareholders Nordic Capital and Avista sold 250 million shares, raising 805 million pounds.

A rift in the Middle East between Qatar and neighbours Saudi Arabia, United Arab Emirates, Egypt, and Bahrain caused oil to fall further below $50 a barrel, weighing on commodities-heavy European markets.

In an early sign of Qatar's isolation impacting companies operating there, Norsk Hydro (>> Norsk Hydro ASA) fell 1.8 percent after saying exports from the Qatalum aluminium plant in Qatar, a joint venture with Qatar Petroleum, were blocked due to the dispute. The company said it was seeking other routes.

Basic resource stocks <.SXPP> fell 0.8 percent, while energy stocks <.SXEP> reversed earlier losses to trade 0.4 percent higher.

Utilities <.SX6P> were the best-performers as investors fled to safety.

Sell-side enthusiasm on European equities seemed to moderate as Morgan Stanley said positive catalysts for the region were beginning to fade.

"Europe has had a very strong run, and tactically it makes sense to look for a more moderate period for a while," said Morgan Stanley equity strategist Matt Garman.

A stronger euro, which weighs on foreign-earning European companies, diminishes the case for European equities, he said.

"Rarely have the currency and positive equity market performance been correlated, and when they have it has been politics related," Garman added, saying relief after the French elections had been felt across asset classes.

The euro has gained 5.6 percent against the dollar over the past two months, and Morgan Stanley strategists expect it to rise further.

Among the handful of gainers, Vestas Wind (>> Vestas Wind Systems A/S) rose 2.9 percent after MHI Vestas, a joint venture with Mitsubishi Heavy Industries (>> Mitsubishi Heavy Industries Ltd), said it was launching a new wind turbine.

Also among top gainers was Lufthansa (>> Deutsche Lufthansa AG), rising 2.6 percent after the German carrier's CEO said he was optimistic on demand and improving traffic from the United States and Asia.

Spain's troubled Banco Popular (>> Banco Popular Espanol SA) hit another record low in choppy trading after Barclays cut its price target on the stock.

The bank's shares have lost more than half their value over fears it could be wound down by regulators if it fails to find a buyer.

(Reporting by Helen Reid; Editing by Raissa Kasolowsky and Mark Potter)

By Helen Reid