European shares fell on Thursday as fresh talk of a selective Greek default, ahead of a meeting of euro zone leaders, combined with weak economic data to hit investor risk appetite.
An unexpected weakening in German private sector growth in July combined with the first contraction in Chinese factory output in a year to pressure growth stocks, including miners, at the open.
Both data had the FTSEurofirst 300 trading slightly lower early on, before losses more than doubled as fresh reports emerged that France and Germany were open to a ?selective default? by Athens.
A media report quoted Luxembourg Prime Minister and Eurogroup President Jean-Claude Juncker as saying a selective default for Greece cannot be exluded.
?Negative comments from Jean-Claude Juncker set the cat amongst the pigeons as he raised the likelihood of Greece selectively defaulting. As a result, the euro and sterling have rapidly given up early gains as traders run to unwind their bullish positions,? he said.
Agreement between the currency bloc?s two biggest economies meant private sector involvement to solve Greece?s debt crisis could move forward, Dutch Finance Minister Jan Kees de Jager said.
?The last two days have seen a small rise in equities as traders wagered on EU Finance Ministers taking one step towards solving their sovereign debt issues. But this mini-rally seems to have run out of steam this morning as traders turn bearish ahead of any announcement,? Manoj Ladwa, senior trader at ETX Capital, said. Until that point, bank stocks had looked set to extend their recent rally to a third day, on optimism euro zone leaders would agree a deal to stop debt-market contagion from engulfing Italy and Spain.
At 0939 GMT, the FTSEurofirst 300 index of leading European shares was down 0.8 percent at 1.081.99 points, after closing the previous session at 1,091.11 points.