European shares suffer weakest day in 7 sessions

The FTSEurofirst 300 index has risen around 7 percent since European Central Bank head Mario Draghi said the ECB would do "whatever it takes" to protect the euro from the sovereign debt crisis that began nearly 3 years ago.

However, traders and investors have taken profits in recent days on the back of the rally, since previous European equity market rebounds have stuttered due to disagreements among European leaders over how to tackle the crisis.

Richard Robinson, a European equities fund manager at British firm Ashburton, said he had sold off some European oil stocks and shares in Swedish bearings maker SKF.

"I'm just a little bit cautious in the short term. I think we might drift a little bit until the end of August," he said.

JULIUS BAER SLUMPS

Swiss bank Julius Baer was the worst-performing stock on the FTSEurofirst 300, dropping 7.4 percent as analysts said it could be paying too much for Bank of America Merrill Lynch's overseas wealth management business.

"Today's announcement on the international business of Merrill Lynch looks rather expensive especially when taking into account the integration costs, implementation risks and need for additional capital increase," said Vontobel analyst Teresa Nielsen.

ING IM senior equity strategist Patrick Moonen said he expected European equity markets to trade sideways until September, when investors expect more clarity over the timing of any new ECB stimulus measures.

The ECB has sent out signals that it could step in again to buy government bonds in order to lower the borrowing costs of debt-ridden Spain and Italy, but only under certain conditions.

European Union leaders cannot do much until the German Constitutional Court gives an expected green light to the euro zone's permanent bailout fund, the European Stability Mechanism, on Sept. 12.

"I think that this market will move sideways with high volatility depending on the data, but really the big catalyst should come in September. I would not chase this market in either direction," said Moonen.

"If central bankers do not deliver by then (September), the markets could be in serious trouble," he added.

Adrian Slack, head of equities at Bastion Capital, said certain benchmark European equity indices were not pushing through crucial technical levels necessary to maintaining the recent rally.

Slack expected investors to sell the DAX if it breached the 7,000 point mark, and for them to sell France's CAC-40 index if the CAC rose to 3,478 points.

"The general consensus appears to be not to pile in on these low volumes," said Slack.