UPDATE 1-European stocks turn down after Brexit, trade-driven rally

A three-day rally in European shares halted on Monday as investors assessed the scale of progress from Friday's U.S.-China trade talks and worried that a Brexit withdrawal agreement was still some way off after signs of a major breakthrough. The pan-European STOXX 600 was down 0.8% at 0814 GMT, handing back nearly half of a more than 2% gain on Friday that was its best day since January.

Growing optimism around last week's Sino-U.S. talks and a Brexit agreement had helped the index log its best weekly performance since in February, making some retreat natural. But analysts said nerves over a slowdown in global growth and the Brexit process were still high. Mining stocks, among the chief barometers of concern over the Chinese economy, shed 2.5%, leading declines among all European sub-sector trading in the red.

Britain's domestically-focused FTSE mid-caps and Irish stocks gave up more than 1% after Friday's 4% surge. "It's difficult to remove that investor caution even if we do get resolutions around Brexit and the trade war," said Roger Jones, head of equities at fund manager London & Capital.

"I think we've got to see better earnings and a better macroeconomic picture." Late on Friday, the United States and China outlined the first phase of a trade deal and suspended this week's scheduled U.S. tariff hikes. But existing tariffs remain in place and officials on both sides said much more work is needed before an accord could be agreed.

Tariffs continued to hurt the Chinese economy, with data showing a further contraction in exports and imports in September. Swiss pharmaceutical companies Roche Holding AG and Novartis AG dropped more than 1% each, and were the biggest drag on the main index, after a report that the United States was considering tariffs on Swiss pharmaceutical products.

Bank stocks were also big fallers, down 1.79%, as eurozone bond yields fell due to cautious investors pouring into fixed income. In a bright spot, Sophos Group jumped 36.5% as Private equity firm Thoma Bravo said it would take the British cybersecurity company private in a deal valuing the company at about $3.8 billion.

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