European markets finished Monday's session deep in the red, as investor confidence took a knock from weak trading seen in markets overseas.
The pan-European Stoxx 600 tumbled 1.12 percent by the close, with all sectors in the region failing to post gains by the end of trade.
Europe's banking index was among the worst sectoral performers, finishing down 1.37 percent amid renewed fears over Italy's budget plans. The FTSE MIB index slipped 2.43 percent by the market close, with government bond yields hitting fresh highs during trade.
The EU reiterated concerns over Italy's budget plans over the weekend, saying it is worried Rome's plans breach what it asked the country to do earlier this summer. In response, Italy said it would "not retreat" from its current spending plans. The news appeared to ratchet up the pressure on the country's already fragile banking sector, with Unicredit, Ubi Banca, Mediobanca and Banco BPM all closing the day down 3.5 percent or more each.
Looking at individual stocks, Norway's Norsk Hydro held onto its crown as the STOXX 600's top performer by the close, after the aluminum firm got a key permit to help it restart its Alunorte refinery at half-capacity. Shares of the Oslo-listed stock rose 3.9 percent on the news.
Tele2 finished up 1.6 percent, off its highs, after the company confirmed that the European Commission had approved its merger with Com Hem Holding. Europe's biggest losers were William Demant and WireCard, which both posted sharp losses, closing down 10.6 percent and 12 percent respectively.
Looking at markets overseas, shares in Asia dipped broadly on Monday after the People's Bank of China said it would cut the amount of cash that banks are required to hold as reserves. The move comes amid concerns about the economic impact of trade tensions and import tariffs between China and the U.S.
Investors continue to keep an eye on U.S. equity and bond markets amid fears of rising interest rates. Comments by U.S. Federal Reserve Chair Jerome Powell last week about the U.S. central bank's interest rate hiking path sent Treasury yields to multi-year highs.
And key nonfarm payrolls data showed a worse-than-expected increase in jobs — but a fall in the unemployment rate to 3.7 percent, the lowest level in almost five decades. The economic data, alongside Powell's comments, sent shares stateside lower Friday, with the S&P 500 posting its worst weekly performance since September 7.
Stocks continued the negative trade on Monday, with the Dow falling more than 100 points by Europe's market close. U.S. bond markets meantime were closed on Monday, in light of Columbus Day.
On the political front, U.K. Prime Minister Theresa May got a boost Sunday after Japanese Prime Minister Shinzo Abe told the Financial Times that he would welcome Britain into the Trans-Pacific Partnership agreement "with open arms" after Brexit. And EU officials have become growingly optimistic about the possibility of a Brexit deal being reached, with European Commission President Jean-Claude Juncker saying an agreement could be struck by November.
However, surveys released by Deloitte and the British Chambers of Commerce on Monday showed that uncertainty is still weighing on British businesses, putting exports, recruitment and investments under pressure.