European equities closed lower on Monday, as Spanish shares sunk on disappointing manufacturing data, while retailers struggled on the first day of December trade.
The pan-European FTSEurofirst 300 Index provisionally closed down 0.3 percent at 1,301.48 points after logging its third straight month of gains on Friday. The Spanish IBEX 35 and the Italian FTSE MIB closed lower by 1.0 and 1.5 percent respectively.
Shares of energy company Enel closed down around 3.8 percent, along with heavy selling in shares of Saipem and Telecom Italia. Traders cited a planned move by Spain to cut financing for the electricity sector as a reason for the move lower, according to Reuters.
Data on Monday showed manufacturing in the euro zone accelerated at its fast pace in two and a half years in November, helped by a ramp-up in production. But disappointing figures from France and Spain added to concerns about the health of the region's wider economy.
The Markit Manufacturing Purchasing Managers' Index (PMI) for the euro zone came in at 51.6 in November, compared with 51.3 the previous month. A reading over 50 marks expansion.
(Read more: Euro zone gets manufacturing boost, France drags)
In other stock news, the U.K.'s biggest retailer Tesco was downgraded by HSBC to "underweight" ahead of results later this week, forcing shares to close lower by around 2.1 percent.
Debenhams closed the day down by 3.7 percent due to a Barclays downgrade, which also shifted its recommendation to "underweight."
German steelmaker ThyssenKrupp slumped after its unsuccessful attempt to find a buyer for its problematic Brazilian mill. Shares in Thyssen closed down around 9.0 percent in their steepest drop in more than two years.
ECB in the limelight
Investors this week will also be looking ahead to a number of key economic releases. In the U.S. third-quarter economic growth numbers will be released, while in Europe, the European Central Bank will hold its last policy meeting of the year.
The U.S. manufacturing sector expanded at its fastest pace in 2½ years last month, an industry report showed on Monday, while the pace of hiring in the sector also accelerated.The Institute for Supply Management (ISM) said its index of national factory activity rose to 57.3 in November—its best showing since April 2011—from 56.4 the prior month.
U.S. stocks wavered between small gains and losses on Monday as the holiday shopping season got off to a lackluster start and the Institute of Supply Management's report on manufacturing found the manufacturing sector expanded far more than expected last month.
(Read more: US manufacturing growth hits 2½-year high)
In Asia, mainland China shares pared losses on Monday following a volatile session that saw them drop 1.6 percent, as fears over reforms in the country's initial public offering (IPO) market overshadowed better-than-expected Chinese manufacturing data.
(Read more: Shanghai shares decline on IPO reforms; PMI in focus)
In European news, U.K. Prime Minister David Cameron has defended his call for a trade agreement between the EU and China, as he landed in China at the beginning of a three-day trade trip.
Speaking to journalists on the trip to Beijing, Cameron admitted that his backing for the Chinese government's calls for a free trade deal between the two blocs would be resisted by some European powers, but said he intended to push the plan through anyway.
Elsewhere in Europe, protests against President Viktor Yanukovich hammered Ukraine's financial markets on Monday, increasing the risk of a currency crisis as the president tries to hold on until an election in 2015.
(Read more: Ukraine protests increase risks of currency crisis)
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