European shares pared earlier gains to close flat on Monday following a late sell-off after reports that Barclays will seek to raise £5 billion ($7.69 billion) via a rights issue.
The FTSEurofirst 300 Index provisionally closed flat at 1,205.18 points despite initially opening higher after a raft of mergers and acquisitions, as the late news from Barclays weighed down on shares.
Reports emerged that Barclays was set to announce on Tuesday plans to raise £5 billion of new capital, with the prospect of raising new equity worrying for shareholders, Barclays needs more capital to meet a requirement from the Bank of England's Prudential Regulation Authority for banks to have a leverage ratio of at least 3 percent.
Shares in Barclays provisionally closed 3.9 percent and the STOXX 600 European Banking Index fell 0.8 percent, making it the worst-performing European equity sector.
(Read More: Britain's banks set to return to the capital markets)
Investor focus this week is squarely on several key meetings from central banks around the globe. The Bank of England, U.S. Federal Reserve and European Central Bank will all hold rate meetings.
U.S. stocks also kicked off the week on a weak note following a tepid pending home sales report ahead of the Federal Reserve meeting and another heavy week for second-quarter earnings.
Back in Europe, mergers and acquisitions helped advertising and drug firms to post gains.
Global ad agencies Publicis and Omnicom announced a merger plan worth $35.1 billion. At a press conference in Paris on Sunday, the chief executives of both companies said the merger would give the combined firm the necessary scale and investment fire-power to combat changes within the advertising business.
(Read More: Global ad market abuzz over $35 billion new giant)
In European news, German finance minister Wolfgang Schaeuble said Greece was still on the hook to meet all its financial obligations despite euro zone officials signing off a further tranche of aid for Greece on Friday.
"The pressure remains, so this has nothing to do with the election schedule," Schaeuble told a German radio station in an interview on Sunday.
The decision to grant more aid delays debates about debt relief for Greece until after German elections in September. Finance minister Schaeuble denied that Germany was hiding the true costs of Greece's bailout before elections.
Asian equity markets declined across the board on Monday with Japanese stocks falling to a new four-week low on the back of a stronger currency, while renewed fears of an economic slowdown in China hindered gains.
In other stocks news, shares of France-based food group Danone closed up roughly 3.15 percent after its revenues beat market expectations for the second quarter.
Shares of U.K.-based airline Ryanair closed down roughly 2.9 percent after the firm maintained its forecast for full-year net profit of 570-600 million euros, below analyst forecasts of 643 million euros.
(Read More: No green shoots in southern Europe yet: Ryanair)
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