PARIS: European stocks fell on Tuesday as renewed worries over Greece offset news of a tie-up between Nokia and Alcatel-Lucent.
A rebound in the euro during the session also prompted investors to book recent gains on the shares of exporters. Luxury goods maker LVMH fell 2.5 percent and airplane maker Airbus lost 2.6 percent.
Shares in the French telecom gear maker Alctel surged 16 percent after the two companies announced they were in advanced talks for Nokia to take over Alcatel.
Nokia shares were down 3.6 percent. Clairinvest fund manager Ion-Marc Valahu expressed scepticism over the merits of the proposed deal.
"They are two of the weaker players in the industry. They could come up with some cost cuts, but just because you combine one weak player with another weak player does not necessarily mean that you will end up with a stronger player," Valahu said.
The deal added to a recent wave of M&A activity that has helped driven European shares higher. However, it wasn't enough to lift European equity markets overall. Investors were spooked by a report saying Greece was preparing for a debt default if it did not reach a deal with its creditors by the end of the month.
Greece denied the Financial Times report and said the negotiations were proceeding "swiftly" towards a solution.
Shares in Greek banks skidded, with National Bank of Greece losing 5.3 percent and Alpha Bank falling 10.8 percent.
"Even if there's been an official denial, investors remain concerned by the risks of a Greek default," Mirabaud Securities' senior equity sales trader John Plassard said.
Other euro zone banking stocks also lost ground, with UniCredit down 2.5 percent, Banco Santander off 2.1 percent and BBVA 1.6 percent lower.
Mining shares also dropped along with metal prices on concern about demand in China, a top commodity consumer, a day before the country updates on economic growth.
Rio Tinto was down 2.8 percent and BHP Billiton fell 3.1 percent.
The FTSEurofirst 300 index of top European shares ended 0.5 percent lower, at 1,639.80 points.
Around Europe, Britain's FTSE 100 index rose 0.2 percent, Germany's DAX index lost 0.9 percent and France's CAC 40 fell 0.7 percent.
Peripheral euro zone markets underperformed, with Spain's IBEX down 1.4 percent and Italy's MIB falling 1.1 percent, halting their recent brisk rally.
European stocks have made strong gains so far this year, with the FTSEurofirst 300 up 20 percent, boosted by the drop in the euro currency as well as by the European Central Bank's asset-buying programme.
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