Defensive sectors such as media, healthcare and telecoms helped Europe's pan-regional STOXX 600 bounce off early lows. The index closed down 0.3% before falling as much as 0.67%.
Also helping to cushion some of the losses were increasing bets of an interest rate cut by the Federal Reserve as early as next month after U.S. data showed inflation barely rose in May.
Expectations of looser monetary policy from the major central banks to counter a global growth slowdown have supported risk assets.
The STOXX 600 had gained 4.5% this month, reversing most of a sell-off in May that was its worst monthly performance in more than two years.
"The risk rally seems to be running out of steam, and there appears to be little room for further upside," strategists at Morgan Stanley wrote.
"Reports suggest both the U.S. and China have done limited preparatory work for the upcoming G20 leaders meeting as the trade negotiating teams on both sides have not met since talks ended at an impasse on May 10. This suggests a reduced likelihood of a trade resolution."
President Donald Trump said on Tuesday he would hold up a trade deal with China unless it agrees to four or five major points, reheating tensions between the two sides.
The biggest faller was Europe's oil and gas index, down 2.2%, as the commodity's price took a hit from an unexpected rise in U.S. crude inventories and by a weaker outlook for global demand. [O/R]
Banking stocks, which tend to suffer when expectations for interest rates fall, lost 1.1%.
London-listed shares of Asia-focused banks Standard Chartered and HSBC dropped as protests in Hong Kong against an extradition bill that would allow people to be sent to mainland China for trial descended into violent chaos.
Italy's FTSE MIB fell 0.7% and its banking index dropped 1.5% as the European Union moved closer to taking disciplinary action over the country's growing debt.
Chipmakers, which get a huge portion of their revenue from China, fell, with AMS AG and STMicroelectronics declining 3.5% and 1.8%, respectively.
Axel Springer jumped 11.5% to touch a nine-month high after funds controlled by U.S. private equity investor KKR offered to buy out minority shareholders of the German publisher for 63 euros a share, a 40% premium to its market price.
World's No. 2 tobacco company British American Tobacco fell 4.4% after it warned of steeper declines in cigarette sales globally mainly due to waning demand in its main U.S. market
Shares in Belgian retailer Colruyt fell 5.7% to the bottom of the STOXX 600 after Goldman Sachs put a "sell" rating on the stock.
Dublin's ISEQ, which typically falls on fears of a disorderly Brexit, ended down 1.5% to post its biggest percentage fall in two weeks.
British lawmakers defeated an attempt led by the opposition Labour Party to try to block a no-deal Brexit by seizing control of the parliamentary agenda from the government.
Boris Johnson, the frontrunner for Prime Minister Theresa May's role, has said he would be willing to take the country out at the end of October, even if it meant leaving without a deal.
(Additional reporting by Amy Caren Daniel and Susan Mathew in Bengaluru; editing by Patrick Graham and Jane Merriman)
By Sruthi Shankar