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Europe stocks close 2% down after China rout

European stock closed lower on Monday, after a sharp selloff in Asian shares highlighted concerns about Chinese market volatility and slowing growth.

The pan-European FTSEurofirst 300 provisionally closed 2.1 percent lower, while the Germany's DAX and France's CAC closed respectively 2.4 percent and 2.5 percent lower.

The U.K.'s benchmark FTSE outperformed its euro zone peers, but still closed unofficially down 1.0 percent.

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FTSE
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DAX
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CAC
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IBEX 35
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Stocks across Europe, the U.S. and Asia tumbled after China's Shanghai Composite tanked to close 8.5 percent down at a three-week low. This added to the sharp losses seen by the index in recent weeks as the fall in commodity prices saps risk appetite.

Declines in the Shanghai Composite quadrupled during its afternoon session, as official data showed China's industrial profits declined 0.3 percent year-on-year in June, after rising in April and May.

Earnings season continued in Europe, with some companies warning of the impact of the slowing Chinese economy. These included French autos supplier Valeo on Monday, which closed 5.4 percent down at the bottom of the CAC after releasing its first-half earnings.

The FTSE's weakest performers were Pearson and Merlin Entertainments.

The former closed down 4.8 percent after confirming it was in talks to sell its 50 percent stake in The Economist, having announced the sale of the Financial Times Group to Nikkei last week.

Merlin Entertainments shares, meanwhile, closed down 4.3 percent after a profit warning was released. Its shares tumbled as much as 7.8 percent in early trading, its worst ever one-day drop.

Better news came from Swiss banking giant, UBS, which reported better-than-expected earnings. However, shares in the bank closed down around 1.6 percent. UBS results came a day earlier than expected, following a report in Swiss paper Sonntagszeitung.

In currency markets, the euro hit a two-week high against a subdued U.S. dollar on Monday, after Germany's Ifo survey for July came in above forecasts, indicating business sentiment in the euro zone's largest economy had picked up.

Meanwhile, U.S. crude for September delivery fell to trade around $47.50 a barrel and Brent crude futures dropped to $53.60, on the back of renewed oversupply concerns after data showed U.S. drilling activity increased last week.

The U.S. will be back in focus later this week, with the Federal Reserve reporting its latest monetary policy decision on Wednesday. Markets are awaiting guidance on whether the U.S. central bank will become the first in a major developed economy to raise interest rates since the hyper-low interest rate environment began.