European stocks ended lower across the board Monday, with banking and insurance stocks suffering the worst of the selling. Warnings of further financial turmoil from G7 finance ministers at the weekend contributed to the session’s bearish sentiment.
London's FTSE-100 was the worst performer, following news of a surge in UK inflation in January. Sterling was higher against the dollar as prospects for further interest rate cuts from the Bank of England diminished.
Insurers were the lead decliners on the FTSE, following a disclosure from American International Group that the value of some of its risky debt portfolio had fallen by $5.96 billion, not $1.6 billion as reported earlier.
Shares of Resolution closed 6.2 percent lower.
Group of Seven finance leaders met in Tokyo over the weekend and warned that the credit turmoil could yet unhinge the global economy and vowed to attempt to restore markets to financial health.
But they did agree that each country would decide individually what fiscal and monetary measures are best to follow.
Financial stocks were sold off heavily following the G7 comments and a widening in credit spreads. Commerzbank was the lead loser on the Xetra DAX, with declines of 3.9 percent.
Staying in the banking sector, Societe Generalelaunched its capital hike in Paris at a 30 percent discount to Friday's close. The offer aims to raise 5.5 billion euros, after the firm announced a further 600-million-euro writedown. Shares of SocGen ended 4 percent lower.
Basic resources stocks rose as oil climbed above $93 a barrel after Venezuelan President Hugo Chavez threatened to stop oil exports to the U.S. after Exxon Mobil won court orders to freeze assets of Venezuela's state-owned petroleum company following a dispute over properties in the country that were nationalized.
Meanwhile, Rio Tintotold shareholders to take no action on rival BHP Billiton's hostile bid. The chairman wrote to all the shareholders saying board members unanimously rejected the offer because it undervalued the miner.
In the utilities sector, London newspaper The Times reported over the weekend that E.ON could launch a counterbid for Spanish utility Iberdrola. But shares of E.ON fell as analysts do not expect E.ON to pursue a hostile bid for Iberdrola after its failed bid for Endesa last year.
And maker of dental implants, Nobel Biocare, missed full-year forecasts after being hit by worse-than-expected currency effects. The Swiss company's shares fell 6.9 percent after it reported a 2.8 percent fall in fourth-quarter net profit.
- Reuters contributed to this report.