By Sruthi Shankar
(Reuters) - European shares pulled back on Tuesday after a rally in the previous session, with losses in healthcare, and construction and engineering firms countering optimism from fresh stimulus plans for the European Union.
The pan-European STOXX 600 (STOXX) gave up early gains to trade 0.8% lower.
Euro zone stocks (STOXXE) also shed 0.9% after an early boost from a 500 billion euros recovery fund that France and Germany called to create on Monday that would offer grants to European Union regions and sectors hit hardest by the pandemic.
The STOXX 600 recorded its biggest daily percentage gain since March 24 in the previous session after an encouraging report from a potential COVID-19 vaccine and optimism as several economies eased coronavirus-driven lockdowns.
"We're following up yesterday with a bit of consolidation, but I would not read too much into it," said Andrea Cicione, head of strategy at TS Lombard.
"You can see a shift in sectoral responses in Europe. Financials and consumer discretionary stocks that had been lagging in the recent recovery led gains yesterday. To me, that is a sign that markets are reacting to something differently."
Healthcare companies (SXDP) - which have largely held resilient in the wake of the coronavirus crisis - fell 0.7%, while construction and engineering firms (SXOP) dropped 1.7%.
Insurers (SXIP) were the sole gainers in Europe after UK's Beazley Plc (L:BEZG) raised 247 million pounds ($301.83 million) in fresh capital, sending its shares up 8.6%.
Banks (SX7P) also posted somewhat minimal losses after wealth manager Julius Baer (S:BAER) saw a spike in trading volumes boost its first-quarter margins even though a strong Swiss franc ate into assets under management.
Automakers (SXAP) took a hit as data showed European passenger car sales saw a record drop in April, the first full month with restrictions imposed to contain the coronavirus pandemic across the continent.
Struggling German industrial company Thyssenkrupp AG (DE:TKAG) jumped 4.1% as it said it was looking for partners for its steel and warship divisions.
French spirits company Remy Cointreau SA (PA:RCOP) dropped 5.1% after Goldman Sachs (NYSE:GS) downgraded its shares to "neutral" from "buy" as it expects a moderate pace of recovery.
Shares in tobacco group Imperial Brands Plc (L:IMB) fell 6.1% said it plans to cut its dividend by a third, and expects a bigger hit from the coronavirus crisis in the second half of the year.