Paris - European stocks fell early on Monday as downbeat readings of euro zone business activity revived worries over the pace of the economic recovery in the single currency bloc.

Data compiler Markit said its composite purchasing managers index (PMI) of activity in France's manufacturing and services sectors slipped deeper into contraction territory in May, dampening expectations for a rebound in the euro zone's second-biggest economy.

Separate Markit data showed manufacturing output in Germany, Europe's largest economy, increased at its weakest rate since September and service sector growth also slowed.

At 09:42 SA time, the FTSEurofirst 300 index of top European shares was down 0.5 percent at 1,387.60 points, retreating from 6-1/2 year high hit last week.

“The market doesn't like at all the French PMIs, and the German data is also disappointing. It eclipses the upbeat Chinese data from overnight and it's a reminder that the latest ECB (stimulus) measures are not magic,” Saxo Bank trader Andrea Tueni said.

European airline shares fell, hurt by rising oil prices on the back of the ongoing violence in Iraq.

Air France-KLM was down 2.2 percent and EasyJet down 1.9 percent.

Bucking the trend, Alstom rose 2.2 percent after the French government secured an option to buy 20 percent of the firm from construction group Bouygues, in a deal clearing the way for the agreed sale of Alstom's energy business to General Electric.

Shares in Spain's Dia added 3.8 percent after the world's third-largest discount supermarkets group said on Friday it had reached a preliminary deal to sell its loss-making Dia France unit to Carrefour. - Reuters