(Reuters) - Losses on Thursday knocked European shares 1.2% off all-time highs as a clutch of dismal earnings and falling bond yields dampened sentiment, while UK-listed Avast soared 18% on merger talks.The pan-European STOXX 600 index slipped 1%, with the oil and gas sector falling 2.7% to a six-month low. Siemens Energy slid 11.1% after scrapping its margin target as Siemens Gamesa — its wind power division — was hit by higher-than-expected raw material and product ramp-up costs. Siemens Gamesa was the worst performer on the STOXX 600, sliding 14.2% and suffering its worst session in two years. Oil majors Royal Dutch Shell and BP fell more than 2% as crude prices dropped on expectations of more supplies. [O/R] Losses in Europe were broad-based, with economically sensitive stocks like banks, automakers, and travel down between 0.3% and 1.6% as investors grew wary of rising COVID-19 cases across the continent. Official data showed that the United Kingdom reported the highest daily increase in COVID-19 cases since Jan. 15. A rally in bonds, considered safer assets, gave further evidence of market caution. [GVD/EUR] “There has been a little bit of a review of the growth story that we’ve all been expecting,” said Jonathan Bell, chief investment officer at Stanhope Capital. “We can see that there is at some point going to be monetary policy tightening given inflationary pressures. The ECB and BoE are saying not yet, but it is clearly starting to come into conversation,” he said, adding that renewed increases in COVID-19 infections and restrictions are also having an overall impact on markets. Economic recovery optimism and a strong start to the earnings season had seen the STOXX 600 hit a record high on Tuesday. (Graphic: Major European stock indexes drop 1% and more, ) UK-based cybersecurity firm Avast Plc posted its best session on record after the company said it was in advanced talks on a merger with peer NortonLifeLock Inc. But analysts warned against euphoria. “The UK’s already very modest-sized technology sector can ill-afford to lose one of its leading constituents,” said Danni Hewson, financial analyst at AJ Bell. “The current surge in takeover activity could have a materially negative impact on the depth, breadth and diversity of the UK stock market. The FTSE 100 dropped 1.1%, with data showing the number of employees on British company payrolls surged in June by the most since the start of the pandemic. [.L] Online fashion retailer ASOS tumbled 18% after it said sales growth slowed in June and higher costs did not translate to higher prices for consumers.