The pan-European STOXX 600 index shed 1.4% after gaining as much as 1.3% earlier in the day, as the technology sector <.SX8P> plummeted 3.8% from a 19-year closing high.

The losses came in line with a 3.8% drop in Wall Street's tech-heavy Nasdaq index, triggered by high valuations and U.S. jobless claims suggesting a stalling in the country's labour market. [.N]

Technology has marked the speediest recovery among its peers from pandemic lows but has also been seen as long overdue for some capitulation of gains.

Weak local retail sales and service sector data earlier in the day augured an uneven economic recovery. But markets clung to the prospect of continued liquidity measures, after a particularly dismal inflation reading earlier in the week.

The European Central Bank is expected to follow the U.S. Federal Reserve in keeping monetary policy easy.

"The easy policy for as long we can see is already something that's been priced in for a long time, and we've gone well beyond it. A moment of reckoning will come at some point," said Andrea Cicione, head of strategy at TS Lombard in London.

The selling spread to most other European sectors, with travel and leisure stocks among the few still trading positive.

The day's losses kept the STOXX 600 comfortably within a trading range seen since early June. After bouncing from March lows, a recovery in local equities and the economy appeared to be stalling.

"The progress we've seen so far was the low-hanging fruit, but from here on, it will be a lot more difficult to make progress, and that's already coming across in the data," TS Lombard's Cicione said.

French stocks fell despite the government unveiling a 100 billion euro stimulus plan to fish its economy out of a pandemic-induced slump.

French drugmaker Sanofi and its British peer GSK fell despite starting a clinical trial for a protein-based COVID-19 vaccine candidate.

British Engineering business owner Melrose Industries topped the STOXX 600 after it flagged signs of a pick-up in some of its markets as the coronavirus crisis slashed its first-half profit by 90%.

Online food services provider Hellofresh bottomed out the STOXX 600, plunging more than 10% in its worst day in more than two years.

(Reporting by Ambar Warrick in Bengaluru; editing by Uttaresh.V and Lisa Shumaker)

By Ambar Warrick