[BENGALURU] European stocks slipped from eight-month highs on Tuesday, as tighter coronavirus restrictions across the continent raised doubts about a swift economic rebound and countered optimism about a Covid-19 vaccine.

The pan-European Stoxx 600 ended 0.2 per cent lower. The index jumped over 1 per cent to close at its highest level since late February on Monday following positive data about drugmaker Moderna's Covid-19 vaccine.

Pfizer and partner BioNTech flagged strong progress in their Covid-19 vaccine last week, sparking a rally in global equities.

"Euphoria is understandable, but unsustainable," strategists at French bank Societe Generale wrote in a note. "The surge of Covid cases in the US and Europe's second lockdown guarantee global economic weakness for several more months."

Many European countries have imposed curbs to fight a resurgence in virus cases. Sweden moved to restrict the size of public gatherings and a British medical adviser suggested strengthening the three-tier system of restrictions when the full lockdown in England ends.

Travel stocks fell 1.1 per cent, with British airline EasyJet down 1.9 per ent after it recorded a 1.27 billion pound (S$2.26 billion) annual loss, the first in its history as the pandemic ravaged the travel industry.

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Healthcare and tech sectors that have outperformed the broader market during the pandemic declined 1.3 per cent and 0.6 per cent respectively.

Meanwhile, growth-linked cyclical sectors such as oil and gas and automakers reversed early losses and jumped 0.7 per cent as investors bet progress in the development of a Covid-19 vaccine will support the battered sectors.

"The vaccine news eliminates downside risks but is more likely to trigger a rotation than an outright risk rally. We think cyclicals are set to outperform in this rotation," said TS Lombard's Oliver Brennan.

However, banks came under pressure as Spain's BBVA fell 4.4 per cent after it and smaller rival Sabadell said they were in talks to create the country's second-biggest domestic lender by assets.

Sabadell jumped 6.8 per cent.

British asset manager Intermediate Capital Group surged 7.9 per cent to the top of the Stoxx 600 after reporting strong half yearly results.

Tobacco company Imperial Brands jumped 7.3 per cent after it forecast a rise in profit for 2021, helped by expected improvements in its e-cigarette business.

REUTERS