NEW YORK (CNNmoney) - Britain's FTSE 100 fell 1.5 percent Monday to wipe out most of last week's gains, led lower by banks such as Barclays and aerospace firm Rolls-Royce as investors worried about a depressed earnings outlook.
Bank and insurance stocks fell after a profit warning from Dutch financial firm ING. In contrast, telecom equipment maker Marconi (MONI) and microchip developer ARM Holdings (ARM) climbed after reporting reassuring results.
The FTSE 100 closed down 78.2 points at 5,067.3 and the CAC 40 blue chip index in Paris lost 2.8 percent to 4,213.91, while Frankfurt's electronically traded Xetra Dax fell 2.6 percent to 4,505.13.
Concern about weak corporate results heightened as hundreds of major European and U.S. companies report this week, including 180 of the S&P 500 companies, such as Intel, IBM and Microsoft.
"You have to be nervous about the earnings outlook because the capacity for shocks is still there and the market's mood is still fragile," said Tony Jackson, UK strategist at ING Barings.
"Most markets have clawed their way back to pre-Sept. 11 levels, but you now get the feeling people want a clearer picture of the economy and corporate earnings to go on much further," an equities dealer added.
Banks weighed heavily on the market, and the sector wiped 20 points off the FTSE 100's value.
The oil sector knocked 18 points off the blue chip index and weak pharmaceuticals stocks accounted for another 11 points.
British Telecom (BT) added to the decline with a 1.5 percent dip after forecasts for the value of its mobile business were cut.
Market volume was modest at 1.6 million shares. Losers outnumbered gainers by three to one among the top 100 companies.
Banking and insurance stocks in London were weak from the outset after ING slashed its profit-growth forecast and also raised its estimate of claims related to the Sept. 11 attacks to  600 million from 50 million euros estimated last month.
HBOS (HBOS) and Barclays (BARC) both fell about 3 percent and Royal Bank of Scotland (RBOS) dipped 2.2 percent. Insurer CGNU (CGNU) slipped 2.7 percent.
Banks have led the market's recovery over the past three weeks, aided by confidence that a slowdown in the U.S. economy would be shorter and less severe than earlier had been expected. But analysts said that optimism was fragile.
"There are genuine concerns about economic growth globally, and there's earnings pressure from a lot of places," said Hilary Cook, director of investment strategy at Barclays Stockbrokers.
She said Barclays had a 12-month price target of 5,600 points for the FTSE 100, but said the market is expected "to have a bumpy ride getting there".
Marconi shares bucked the negative trend and rallied 13.2 percent after it released second-quarter results that were no worse than it had forecast, offering it some breathing space.
One analyst said the results were encouraging for Marconi's recovery, but there still is concern about its debt, its need to refinance and the level of spending among its customers. "It's a long way from being out of the woods yet," the analyst said.
The Midcap FTSE 250 index closed down 18.6 at 5,432.3 while the techMARK technology-laced index edged 0.4 points higher to 1,333.5 
-- from staff and wire reports
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