Yardeni Research's Edward Yardeni believes the U.S. economy is picking up steam.Trading Nationread more
* Lawmakers seek to block no-deal Brexit
* London's FTSE down after four-day run of gains
* U.S. manufacturing contracts for first time in 3 yrs (Updates to close)
Sept 3 (Reuters) - European shares retreated from a 1-month high on Tuesday as weak U.S. factory data added to worries about global growth, while uncertainty over Britain's chaotic exit from the European Union knocked the FTSE 100 lower after a four-day run of gains.
The pan-European STOXX 600 index dropped 0.2% at the close after falling as much as 0.7% following the release of data showing U.S. manufacturing activity contracted for the first time in three years in August.
The Institute for Supply Management's latest numbers came as stark evidence of the U.S.-China trade war taking a toll on global growth, sending risky assets such as oil and global stocks lower.
Europe had its own headache to deal with. After British Prime Minister Boris Johnson on Monday implicitly warned lawmakers to back him on Brexit or face an election, an alliance of opposition lawmakers and rebels in Johnson's Conservative Party began a bid to stop to block a no-deal exit.
A vote is expected after 2000 GMT.
Johnson lost his working majority in parliament when one of his Conservative lawmakers defected to the pro-European Union Liberal Democrats.
London's mid-cap stocks, traditionally harder hit by Brexit concerns, bounced off early lows to close down 0.1% while the blue-chip index fell 0.2% as sterling rebounded.
"The likelihood of general election has just gone up given the fact that they no longer have the parliamentary majority," said Will James, senior investment director for European equities at Aberdeen Standard Investments in London.
"If we see continued period of sterling strength, I would expect domestically focused mid-cap FTSE 250 names to outperform. People are currently are quite underweight on the UK names than the more globally exposed large-cap names."
European stocks gained some ground after Reuters reported that European Central Bank policymakers are leaning towards a stimulus package that includes a rate cut, a beefed-up pledge to keep rates low for longer and compensation for banks over the side-effects of negative rates, according to sources.
The ECB has all but promised to announce more stimulus after its Sept 12 meeting to support a slowing eurozone economy, hit by an escalation in the U.S.-China trade war.
After both sides imposed tariffs on each other's goods, Washington and Beijing officials are struggling to schedule a meeting this month to renew trade talks, Bloomberg reported on Monday.
The rising worries encouraged investors to shift away from risky equities to safe-haven assets such as government bonds, resulting in yields on German and Italian 10-year bonds hitting a record low.
Trade-sensitive shares of Germany and France were down about 0.4% each, while Milan-listed shares closed down 0.3%.
In Italy, members of 5-Star are holding a ballot on the party's internet platform on Tuesday to decide whether the group should join forces with the Democratic Party, its traditional foe, and expectations are that 5-Star members will approve a coalition deal.
Defensive sectors such as utilities and telecoms were among the few sectors gaining in the STOXX 600, while oil and gas companies led decliners with a 0.9% loss as oil prices sank.
Shares of Takeaway.com dropped 5.9% after a top shareholder in Just Eat said it would vote against the British food delivery company's proposed 9 billion pound ($11 billion) merger with Takeaway.com. Shares of Just Eat slid 2.8%, dragging the retail index down 0.4%.
France's second largest telecoms operator Iliad fell 6.3%, the biggest decliner on the STOXX 600, after it reported a loss of 127,000 mobile subscribers to competitors in the first half of the year. (Reporting by Sruthi Shankar and Medha Singh in Bengaluru, Editing by William Maclean)