European stocks slipped Thursday, wiping out the previous session's late rally that was spurred by hopes Greece is close to reaching a deal with its creditors.

The Stoxx Europe 600 was 0.4% lower in early trade. The index had surged to close 1.3% higher on Wednesday after the Greek prime minister said Athens was close to hammering out an agreement.

But European officials played down the chances of an imminent deal, saying there was still some way to go before the impasse over the future of Greece's finance is resolved, and the euphoria in markets receded Thursday.

The comments suggest "this incredibly protracted showdown still has some way to go", said interest rate strategists at Rabobank.

Germany's DAX index fell 0.4%, France's CAC 40 was down 0.6%, and the U.K.'s FTSE 100 was 0.3% lower.

Sentiment in European markets is likely to remain sensitive to each piece of news on the Greek negotiations, said Ian Williams, economist and strategist at brokerage Peel Hunt.

Despite the pullback in equity markets, Greek bonds extended Wednesday's rally. The two-year Greek bond yield fell by around 0.3 percentage point to 22.65%. Still, yields at this level indicate investors are factoring a significant chance of default by Athens.

In currency markets, the euro continued to push higher, having rebounded along with equities late on Wednesday. The common currency was up 0.3% at $1.0929.

In commodities, Brent crude oil was up 0.4% at $62.29 a barrel, while gold climbed 0.3% to $1,188.60 an ounce.

Write to Tommy Stubbington at tommy.stubbington@wsj.com

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