By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- European stocks fell Wednesday as the euro regained traction against the dollar, keeping German shares from advancing in the wake of encouraging data from Europe's largest economy.

The Stoxx Europe 600 dropped 0.8% to 399.44, with none of the major sectors moving higher.

The pan-European index was stuck in the red after a better-than-expected report on German business sentiment. The Ifo Institute's business-climate indicator (http://www.marketwatch.com/story/ifo-german-business-confidence-rises-again-2015-03-25) was at 107.9 in March, above the 107.3 forecast by a Wall Street Journal survey of economists. The March reading was the highest since July 2014.

"Germany's strength is good news for the rest of the eurozone, although the firming recovery in countries like Spain and even Italy means they may be less dependent on German demand than during the depths of the crisis in 2011/12," said Christian Schulz, senior economist at Berenberg, wrote in a report.

Despite the brighter sentiment figures, Germany's DAX 30 fell further as the session wore on, losing 0.9% to 11,901.50.

The German index "is generally playing on the [euro-dollar] trade now," and the euro's advance against the greenback "impacts negatively on the highly weighted exporters on the DAX," said Richard Perry, market analyst at Hantec Markets, in emailed comments.

But Perry said he doesn't see this as too negative, with the "nice" three-month upward trend intact. The DAX has charged up nearly 22% this year to record highs, benefiting from the devaluation of the euro stemming from a European Central Bank asset-purchase program worth 1.1 trillion euros ($1.21 trillion).

The euro (EURUSD) on Wednesday was buying $1.0989, up from $1.0926 late Tuesday.

While the euro in that trade "has remained resilient this week, it's still just flirting with a downtrend resistance line that has been in place since December last year," said Stan Shamu, market strategist at IG, in a note Wednesday. "Until we see a close above $1.1000, I wouldn't be jumping into longs just yet as the medium-term trend is still lower."

In Frankfurt, shares of Deutsche Lufthansa SA fell 1.2%, extending losses in the wake of Tuesday's deadly Germanwings plane crash (http://www.marketwatch.com/story/france-launches-difficult-search-and-recovery-for-germanwings-flight-9525-2015-03-25) in the French Alps.

France's CAC 40 gave up 0.9% at 5,045.09. Among the worst performers on both the CAC and the Stoxx 600 was Accor SA . Its shares dropped 3.5% after Eurazeo SA and Colony Capital said they plan to sell a 9.65% stake in the French company behind the Sofitel and Novotel hotel brands.

The U.K.'s FTSE 100 (http://www.marketwatch.com/story/ftse-100-edges-up-but-barclays-falls-after-downgrade-2015-03-25) shed 2 points at 7,017.81, with shares of Barclays PLC down 2.1% following a ratings downgrade at Investec to hold from buy.

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