European stocks close lower on Italian and US turmoil
European shares closed lower on Monday, with Italian stocks leading the fall, after a series of cabinet resignations that could trigger an election. Stocks were also sent lower as a possible U.S. government shutdown becomes ever likely.
The pan-European FTSEurofirst 300 Index provisionally closed down 0.7 percent at 1,245.76 points, after Silvio Berlusconi ordered a number of his ministers to resign from the cabinet on Saturday, throwing the administration into chaos. Italian Prime Minister Enrico Letta has said he will go before parliament on Wednesday for a confidence vote.
However, Italy's FTSE MIB did recover from sessions lows on reports that Berlusconi's center-right party could rebel if he continues to threaten to bring down the government. The FTSE MIB closed down 1.3 percent; Britain's FTSE 100 and Germany's DAX both provisionally closed down 0.9 percent.
Shares of Italian financial services firm Fondiaria-SAI closed provisionally down 1.65 percent, banking groups Ubi Banca and Intesa Sanpaolo fell 4.10 percent and 3.54 percent respectively, and Mediobanca also posted a decline of 2.07 percent.
However, Telecom Italia was a standout gainer in Italy, after an upgrade from JPMorgan to "neutral" due to a capital increase; shares closed around 5.1 percent higher.
Meanwhile, the U.S. budget battle continued to weigh on global stocks. U.S. stocks tumbled on Monday, as fears increased that the government will be forced to shutdown at the end of the day. The country is facing its first government shutdown in 17 years, which could involve federal employees facing unpaid temporary leave.
In Asia, China's final reading of manufacturing activity from HSBC came in at 50.2 in September, lower from a preliminary reading of 51.2 earlier this month. Still, the data was higher from August's 50.1 reading.
Shares of U.K. homebuilders also received a bounce after Prime Minister David Cameron said on Saturday that the "Help to buy" program program would be launched three months earlier than planned. Shares of Barrat Development closed up around 2 percent while Taylor Wimpey was higher by 3.5 percent.
(Read more: Tough love: Conservatives target UK's unemployed)