The benchmark pan-European STOXX 600 lost 0.8% at 516.80 points.

The automobile sector led sectoral declines, falling 2.1% to its lowest in nearly a year. The sub-index was dragged by a 4.7% drop in Stellantis after Barclays downgraded the stock to “equal weight” from “overweight”.

SAP declined 1.5%, pushing down the heavy-weight technology sector nearly 1%, after a report said U.S. prosecutors are broadening a probe on potential price-fixing by the German software developer.

All other STOXX 600 sub-sectors also declined.

Amongst regional bourses, France’s CAC 40 fell 1.1%, the most amongst its peers, while Germany’s DAX lost 0.9%. Britain’s FTSE pared early gains and was flat. It rose 0.3% at the open on a report

that the Bank of England Governor, Andrew Bailey, said the central bank could move more quickly to cut interest rates if there is further good news on inflation.

“A stalling of the Chinese rally, higher oil prices, higher bond yields, and a stronger dollar is putting that bullish narrative under some pressure,” Ben Laidler, head of equity strategy at Bradesco BBI said.

“You’re seeing a bit of natural profit-taking. Traders will be looking for some guidance from the reopening of China and the U.S. payrolls report on Friday.”

Meanwhile, PMI data showed Euro zone business activity contracted in September to 49.6 from August’s 51.

September’s services’ PMI figures for major European economies showed Italy’s service sector slowed almost to stagnation, while France’s contracted, reversing an Olympic-driven growth seen in August. For Germany, growth in the services sector slowed for a fourth consecutive month coming to a near standstill.

The data bolstered expectations for an interest rate cut at the European Central Bank’s meeting on Oct 17.

Also firming rate-cut bets, ECB board member Isabel Schnabel said euro zone inflation is increasingly likely to ease back to the central bank’s 2% target, dropping her long-standing warning about the difficulty of taming price growth.

The Eurozone producer prices data is due at 0900 GMT.

Among individual stocks, potash and salt miner K+S slumped 6.8% to the bottom of the STOXX 600 after J.P. Morgan downgraded the stock to “neutral” from “overweight”. (Reporting by Pranav Kashyap in Bengaluru; Editing by Sonia Cheema and Eileen Soreng)