Investors worry about a prolonged impact to business after China reported an uptick in cases of the virus on Friday and South Korea reported 100 new cases, while more than 80 people tested positive for the virus in Japan.
The pan-European STOXX 600 index shed 0.5%, ending a volatile week 0.6% lower after two weeks of gains.
On the day, STOXX 600 deepened losses after a survey showed the U.S. services sector dropped to its lowest level since October 2013 in February, signalling a contraction for the first time since 2016, while the manufacturing sector also clocked its lowest reading since August.
The was preceded by similar data from the euro zone that showed business activity expanded at a better-than-expected pace, although expansion remained slow.
"The market is beginning to wake up to the idea that we're going to be seeing bad numbers which are going to be replicated elsewhere," said Jonathan Bell, chief investment officer at Stanhope Capital.
"With the next set of PMIs (in Europe) we'll likely see levels we haven't since the depths of the global financial crisis."
Europe's main index had scaled record highs earlier in the week as data signalled a slight slowdown in the outbreak, lending weight to forecasts that the crisis might blow over by April.
The outbreak has killed more than 2,000 people and upended industrial activity in China, causing disruptions for several European manufacturers that supply and source products from one of the EU's largest trading partners.
Auto stocks led losses, down 1.9% in their worst session in four weeks.
With losses of more than 8% so far this year, the sector is the worst performing among major sectors in Europe, steepening losses since the outbreak as Hubei - the epicenter of the epidemic in China - is an auto manufacturing hub.
Frankfurt's main index, stacked with car and truck makers, dropped 0.6%.
A slide in oil prices knocked the energy sector.
Among technology stocks <.SX8P>, software firm SAP lost 1.3%, while chipmakers AMS AG, STMicroelectronics and ASML all fell more than 0.9%.
Among individual movers, British luxury brand Burberry Group fell 2.6% after Jefferies cut the stock's price target, saying it was one of the most exposed brands to the coronavirus outbreak.
French consultancy Sopra Steria Group topped the STOXX 600 after it reported strong annual results and announced plans to buy software developer Sodifrance.
By Susan Mathew