French carmaker PSA Peugeot Citroen leapt 16 percent in huge volumes after the company said it was in talks over potential cooperations and alliances. Sources said the group was in advanced talks with General Motors. The sharp rise in the shares was fuelled in part by short sellers scrambling to cut their positions, traders said. According to Data Explorers, PSA was the fourth most shorted stock on France's CAC 40, with nearly 7 percent of the company's shares out on loan, while buy-and-hold investors have been favouring rival Renault. Data showed on Wednesday the euro zone's key service sector shrank unexpectedly in February while growth in Germany's manufacturing and services sectors also slowed when compared to the previous month. Also weighing on sentiment, the flash euro zone Purchasing Manager's Index fell more than expected to 49.4, below the 50 level that signifies contraction. At 1249 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 percent at 1,078.34 points, further retreating from a near seven-month high hit on Monday. The euro zone's blue chip Euro STOXX 50 index was down 0.6 percent at 2,527.17 points. However, technical analysts said the two-day slide in European equities looked more like a pause in a sharp rally started in mid-December, rather than a change in trend, with both the FTSEurofirst 300 and the Euro STOXX 50 remaining in their upward channels, while the DAX triggered a bullish chart signal called 'golden cross'.