Europe's STOXX 600 <.STOXX> fell 0.2 percent, extending the previous session's losses slightly. Both euro zone stocks <.STOXXE> and blue chips <.STOXX50E> fell 0.2 percent.

Financial services, insurance and banking stocks were among the worst performers, punished by heavy losses from British subprime lender Provident Financial.

Provident (>> Provident Financial) plummeted as much as 20 percent after warning that disruption from the reorganisation of its consumer credit division would weigh on its results for the rest of the financial year.

"We had been concerned about rising impairments and customer attrition in the consumer credit division as the new model was implemented. The transition appears to have been more painful than expected," said Liberum analysts.

Belgium's KBC (>> KBC Groupe) was the worst-performing on the banking index <.SX7P>, down 4 percent as its investor day got off to a disappointing start.

KBC released a new core equity tier 1 target, a key metric of banks' solvency, of 16.6 percent, and analysts at KBW said the new figure did not leave room for excess capital distribution.

"We expect the share price may be on the weak side before further details are disclosed during the day," they said.

A supply glut weighing on crude prices compounded losses, sending the oil and gas index <.SXEP> to a near seven-month low.

Italy's equity market <.FTMIB> provided some relief, however, as banks UBI Banca (>> UBI Banca), BPER Banca , UniCredit (>> UniCredit SpA) and Intesa Sanpaolo (>> Intesa Sanpaolo) all gained between 2.5 percent to over 5 percent after Intesa offered to buy the good assets of two troubled Veneto banks.

Italy benchmark jumped 1.3 percent on the back of this positive development for its banking sector.

Retail stocks were also weighed by Belgian food retailer Colruyt (>> Colruyt) falling 6.7 percent after its full-year results missed consensus.

Despite some glum company updates on the day, the latest first-quarter results figures highlight the reasons for investors’ belief in underlying strength among European companies.

STOXX 600 companies have on average reported earnings 10.2 percent above estimates, beating the 4 percent average surprise factor (since 2011) and the 6 percent surprise factor over the past four quarters, Thomson Reuters I/B/E/S data showed.

Of the 300 companies reporting first quarter revenues to date, 74.3 percent exceeded analyst estimates, against 53.6 percent in a typical quarter.

(Reporting by Kit Rees and Helen Reid, editing by Larry King)

By Helen Reid and Kit Rees