The pan-European STOXX 600 <.STOXX> ended down 0.5 percent, reversing some of last week's gains that saw the index hit a one-month high. The market notched up four straight days of gains, its longest winning streak since November.
Germany's DAX <.GDAXI> and France's CAC 40 <.FCHI> fell 0.3 and 0.4 percent respectively. Ahead of Tuesday's crunch UK parliamentary vote on Brexit, London's FTSE 100 declined 0.9 percent.
Luxury goods firms, which rely on appetite for handbags and jewellery from China's burgeoning middle class, bore the brunt of the selling.
LVMH, Hermes and Gucci owner Kering were among the biggest fallers in Paris, down between 1.6 and 2.6 percent, while Moncler in Milan dropped 2.7 percent. On average, one third of the luxury sector is exposed to Chinese demand.
Danish jeweller Pandora slumped 6 percent to the bottom of the STOXX 600, also hurt by a price target cut by Morgan Stanley. Burberry bucked the trend, garnering strength from a BAML upgrade to neutral from underperform.
UK-listed miners <.FTNMX1770>, which are also exposed to the health of the world's No. 2 economy, were down 1 percent.
Adding to market nerves was the start later on Monday of the fourth-quarter U.S. earnings season, with Citi first to report.
S&P 500 earnings will have grown 14.5 percent in the final quarter of the year, the slowest since the third quarter of 2017, sharply lower than the 28.4 percent rise in the third quarter last year and almost flat year-on-year, I/B/E/S Refinitiv data indicates.
In Europe, gloom across technology stocks <.SX8P> returned with the weaker Chinese data. The tech index fell 1.5 percent.
Having briefly dropped in early deals after reporting fourth-quarter sales at the bottom end of its guidance, chip designer and Apple supplier Dialog Semiconductor jumped 1.9 percent.
Credit Suisse said it believed the company's trading update was much better than its peers and noted strength in the company's non-Apple business.
Continental shares rose 3 percent, also rebounding from initial losses after the auto parts supplier warned of deteriorating conditions in the car sector.
"Conti has most likely tried to be cautious by giving a broader range for 2019 guidance," said Jefferies analysts.
JD Sports delivered some good news to the UK's battered retail sector, forecasting profits at the upper end of expectations. Shares gained 6.4 percent on London's FTSE 250.
Elsewhere, M&A caught investors' attention after pan-European stock market operator Euronext officially launched its all-cash $729 million bid for Oslo Bors.
The news came just hours after the Norwegian stock market operator's board said it had found alternative bidders and would issue a recommendation by late February.
Euronext shares gained 1 percent, while rival London Stock Exchange rose 1.5 percent as the news stirred expectations of potential dealmaking among stock market operators.
Broker recommendations drove other individual moves. Swiss hearing aid maker Sonova rose 3.9 percent after UBS upgraded its rating to buy.
French retirement home operator Orpea slumped 7.5 percent after Exane cut its rating.
(Reporting by Josephine Mason; additional reporting by Danilo Masoni; Editing by Helen Reid and Mark Potter)