European shares fell on Tuesday morning, after disappointing earnings reports from UBS and Alfa Laval and as Greece remained in danger of failing to secure a new bailout to avoid a chaotic default on its debt.
Swedish engineer Alfa Laval fell 7.9 percent after posting fourth-quarter core earnings and order bookings below market expectations, while UBS fell 1 percent as the Swiss bank warned on its first-quarter performance.
The FTSEurofirst 300 index of top European shares was down 0.4 percent at 1,071.19 points at 0946 GMT. The index hit a six month high in the previous session.
"The earnings season has been fairly mixed," said Keith Bowman, equity analyst at Hargreaves Lansdown. "We still have got difficulties with the banking sector and UBS results signify those concerns. The investment banking sector is a very tough place to be at the moment."
The STOXX Europe 600 banking index fell 0.5 percent, with KBC Groep down 1.7 percent and Natixis falling 1.6 percent. European banks were the worst performers in 2011, down more than 30 percent on their heavy exposure to peripheral euro zone countries.
UBS had a torrid time last year. Trading and advisory income was hammered as clients pulled back from markets due to the euro zone debt crisis, and stopped doing deals. The outlook is set to remain tough as tougher regulations and the economic slowdown bites.
"Some weaker than expected figures prompted investors to take some money off the table," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels. "As risks are clearly still in the market, caution remains warranted."
Shares in watch Group, the world's largest watchmaker, fell 4 percent despite reporting an 18 percent jump in profits last year, with traders saying the albeit strong numbers came in lower than many in the market were expecting.
Investors also kept a wary eye on Greece, where leaders need to secure a new bailout deal to avoid a messy default on its debts are caught between EU demands that they accept painful reforms to the economy and a national strike against such austerity.
The blue-chip Euro STOXX 50 index fell 0.5 percent to 2,497.06. Although chartists said there was still potential for the index to move up to the next key resistance level of 2,560 that could prove hard to breach.
"This area is a strong resistance, which could become an obstacle on the way up," said Dmytro Bondar, technical analyst at RBS.
Among individual movers, Nordic telecoms group Tele2 fell 2.6 percent. The company said it expected subscriber growth to slow in its key Russian market.
Commodities trader Glencore was up 0.9 percent. It agreed on Tuesday to buy the remaining 66 percent of Xstrata for $41 billion in a record deal to create a powerhouse spanning mining, agriculture and trading. Xstrata shares, which rose strongly last week on merger talks, were down 2 percent.
ArcelorMittal, the world's largest steelmaker, rose 2 percent after forecasting an improvement in the first half of 2012 from a weak end to last year, with a clear pick up in North America.