By Sara Sjolin
LONDON (MarketWatch)--European stock markets dropped Monday, as
uncertainty over the coming U.S. presidential election and worries
about structural reforms in Greece weighed on investors' minds.
The Stoxx Europe 600 index lost 0.6% to close at 273.21, giving
up a 0.4% Friday gain that followed encouraging U.S. labor
data.
"Equities have been range-trading and people don't know if they
should push any higher," said Peter Dixon, strategist at
Commerzbank in London.
"We also have event risks this week with the U.S. election, and
it would be wise to stay on the sidelines until we have more
clarity," he added. "If we get a Romney victory, markets will see
it as a surprise and sell off as the first reaction. Markets don't
like surprises."
Shares of global banking major HSBC Holdings PLC gave up 1.3%,
after the bank said third-quarter net profit tanked 52% and it set
aside an additional $800 million provision for a U.S.
money-laundering investigation.
Shares of Dutch postal company PostNL NV dropped the most in the
pan-European index, 11%, after the firm said third-quarter profit
fell, mainly because of a decline in addressed-mail volumes.
Pointing in the other direction, shares of Weir Group PLC rose
4.6%, as the manufacturing and engineering firm said it would
deliver double-digit growth in 2012.
For the broader sentiment across European bourses, worries about
the tight race in the U.S. presidential contest ahead of Tuesday's
vote kept investors on the sidelines.
"The worst-case market scenario is likely to be a narrow
[Barack] Obama victory, where a bruised Republican Party has enough
power and frustration to cause large fiscal-cliff tensions,"
analysts at Deutsche Bank wrote in a note. "It may never arise, but
surely the market would factor in some risk even if it's not
immediate. A clear victory for Obama would probably reduce but not
eliminate this risk."
U.S. stock traded mixed on Wall Street on the back of a decline
in the Institute for Supply Management's nonmanufacturing
index.
Greece was on investors' mind as well, as parliament prepared to
vote later this week on the latest rounds of budget cuts and tax
hikes demanded by the country's troika of international lenders --
the European Central Bank, the International Monetary Fund and the
European Commission. A vote against the austerity package could put
the next tranche of bailout money at risk.
The uncertainty ahead of the vote added pressure on the euro,
which slumped to an almost two-month low against the dollar.
In Spain, data showed jobless claims rose by almost 130,000 in
October, bringing the total number of unemployed to 4,833,521.
In addition, a report in Germany's Die Welt am Sonntag said over
the weekend that the European Central Bank is reviewing if it is
treating Spanish government bills too generously when they are
presented as collateral for loans. A representative from the ECB
said they bank is investigating the issue.
Shares of Spanish banks declined, with those of BBVA SA down
2.6% and Banco Santander SA off 2.5%.
The IBEX 35 index slumped 1.9% to 7,818.60.
The yield on 10-year government bonds fell 9 basis points to
5.73%.
Risk-sensitive sectors, such as banks and resource firms, were
among the biggest decliners in Monday's trades.
The Italian FTSE MIB Index gave up 1.4% at 15,544.40, with
shares of Banco Popolare SC off 3.1%.
In France, Credit Agricole SA shares lost 2.5% and those of
Societe Generale SA gave up 2.4%.
Oil group Total SA shares tripped 1.5%.
The CAC 40 index fell 1.3% at 3,448.50.
Among German stocks, shares of Deutsche Bank AG dropped
1.5%.
Daimler AG shares gave up 0.4% after Goldman Sachs removed the
car maker from its conviction buy list, but kept a buy rating on
the stock.
The DAX 30 index slipped 0.5% at 7,326.47.
In the United Kingdom, shares of Barclays PLC fell 1.5% and
Royal Bank of Scotland Group PLC slipped 1.7%.
Mining major Rio Tinto PLC's shares fell 2.2%, while shares of
oil group BP PLC gave up 0.9%.
The FTSE 100 index tripped 0.5% at 5,839.06.
Outside the major indexes, shares of Svenska Cellulosa AB rose
1.5%, after the hygiene-products firm said it introduced a
cost-cutting program.
Write to Sara Sjolin at AskNewswires@dowjones.com