By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets dropped on Wednesday, as excitement over the prior day's encouraging U.S. data faded, after investors started to focus on the implications of stronger figures, in particular a potential reduction in Federal Reserve stimulus.
The Stoxx Europe 600 index lost 0.8% to 305.66, partly erasing a 1.3% gain from Tuesday.
Shares of H&M Hennes & Mauritz AB gave up 1.6%, after analysts at Goldman Sachs cut the Swedish fashion retailer to sell from neutral.
Banks were also declining, retreating after posting solid gains on Tuesday. Shares of Royal Bank of Scotland Group PLC (>> Royal Bank of Scotland Group plc) dropped 1.7% in London, Commerzbank AG shaved off 1.5% in Frankfurt and Credit Agricole SA lost 1% in Paris.
The broader European stock market was also showing downbeat moves, taking a breather from broad-based advances in the prior day's trade. Better-than-expected U.S. consumer-confidence data and upbeat housing data sent markets rallying on Tuesday, as euphoria over the recovery offset worries that it could trigger the Fed to taper its aggressive bond-purchasing program.
Last week, Fed Chairman Ben Bernanke said the central bank could start to reduce its stimulus program in coming months if data continue to improve, stoking fears of market turmoil.
The Dow Jones Industrial Average (DJI) closed at a record after the data, but U.S. stock futures pointed to a lower open on Wednesday.
Back in Europe, the U.K.'s FTSE 100 index dropped 1.2% to 6,681.11, while Germany's DAX 30 index erased 1% to 8,396.52. France's CAC 40 index fell 0.9% to 4,013.21